Isolation or Cooperation? China's New Five-Year Plan
Some have speculated that the main aim of China’s 14th Five-year Plan is to protect itself from the outside world, while still benefiting from international trade. How true is this interpretation?
China recently held the fourth session of the 13th National People's Congress (NPC), which means nothing to most people but is actually a relatively important event.
The purpose of the annual meeting of what is often (maybe a little unfairly) dubbed China’s rubber-stamp parliament is to confirm and announce new policies and legislation. It’s a time to take stock of the government's achievements and failures (mainly achievements), reaffirm the supremacy of the CCP, and plot a course for the future. Every five years, a very special event takes place: the announcement of a new Five-Year Plan.
The full version of the “14th Five-Year Plan (2021-2025) for National Economic and Social Development and the Long-Range Objectives Through the Year 2035” (that’s FYP to you and me) is currently only available in print in official stores across China. The rest of us will have to make do with summaries and infographics published by the State Council and publicised through national newspapers. Through these tidbits, we can draw some general conclusions as to what China’s plans are, both nationally and internationally, with regards to economic growth, trade, diplomacy, environment, transport, urbanisation, rural development, and technology.
According to an article in The Economist, “the main business of the congress was ratification of a new five-year plan that aims to make China even more powerful, while guarding it against global rivals.” They claim that the plan confirms suspicions that China’s long-term future plans focus on “trying to insulate the country from the hostile foreign forces that it believes are arrayed against it.”
I hesitate to say it, but the esteemed magazine may be projecting a little. Maybe I was just triggered, I’m not sure. But I can’t help but feel that they’re jumping to conclusions based on the very little information available to the public, most of which has clearly been spun for propaganda purposes and to keep the international community in the dark as to China’s actual policy-making apparatus. The idea that we can confidently say how China will be making moves into 2035 is a little absurd, even if the prediction is just ‘they seem a little defensive’.
But who knows, maybe I’m being overly judgemental. Let’s take a look at the information the State Council has released so far about the FYP and see what we can come up with. Perhaps you, my dear readers, will see something I don’t!
Economic development
The growth target has been set at 6%, which some have indicated is pretty low, but the government insists is more than high enough considering the current uncertainty in the global economy and China’s recovering status. China was still the only major economy to grow during 2020, but GDP growth will apparently focus more on quality as opposed to quantity in the future. What are some examples of this quality growth the government is planning?
Something that was emphasised was the dual-circulation system - internal and external - to reduce China’s reliance on overseas markets and strengthen the domestic economy. This not only means boosting domestic consumption, but also rapidly developing technologies such as semiconductors and other high-tech products so they no longer need to be imported.
China is clearly dead set on improving its Research & Development and technology sectors. Last year, they invested almost 2.4 trillion yuan in R&D, and China's ranking in the Global Innovation Index has risen from 29 in 2015 to 14. They’ve expressed interest in developing AI, and they’re also in the process of developing a digital currency to be used alongside existing digital payment platforms.
Having said this, China is clearly interested in boosting foreign trade, FDI, and allowing greater access for foreign companies into the Chinese market as well. The terms of the government’s Negative List (which restricts access to the market for certain industries or requires special conditions before approval) has been shortened year on year, and is likely to be shortened again. In general, foreign investment is being encouraged, especially in underdeveloped regions in central and inner China. A new hub is even being built in Shanghai that is set to become an international urban hub, as well as a major contributor to local economic growth by 2035.
Something that will support the dual-circulation system is the "Global 1-2-3 Logistics Circle", which aims to boost China’s transport capabilities and efficiency so that domestic goods are delivered in 1 day, goods to neighbouring countries are delivered in 2 days, and goods to the rest of the world delivered in 3 days. The plan includes development of a transportation corridor with ASEAN countries, further investment in China’s railway links with Europe, and its sea links with Latin America and Africa. Many of these plans are part of the larger Belt and Road Initiative (BRI).
They also want to improve State-owned Enterprises (SOEs), which is a great idea considering how much of a financial drain they’ve been on the economy since... they were established. While they’re great for ensuring high levels of employment, they’ve had serious profitability problems, and have struggled to compete with private businesses in recent decades. It seems that the government intends to expand their influence internationally, probably by giving major construction contracts in BRI regions to SOEs to ensure compliance with government standards and full employment.
Standards of living - public services, rural living
A big feature of the FYP was the elevation of rural living and the promotion of rural development. Farmers’ earnings growth must outpace that of urban workers', and there was an emphasis placed on the need to revamp rural areas and modernise agriculture in general. Now that the country has successfully eradicated absolute poverty, the focus is now on raising the standard of living for those in rural areas, and bringing more stability to the agricultural sector. When policies are introduced, they will probably be heavily focused on providing services to the countryside that are at least comparable to those that urban residents enjoy, and providing better access to commodities to actively close the gap between urban and rural living standards.
The government intends to up spending on healthcare and education, especially in rural areas and villages. They also intend to allow children to attend schools in the area in which they live, as opposed to limiting them to schools in their hometown as part of the relaxation of the hukou (household registration) system.
Environment
Aims for improving China’s environment are simultaneously ambitious and vague. The government urged “efforts to build an economic system featuring green, low-carbon and circular development, and to promote an overall green transformation of the economy and society,” without really outlining how this was to be achieved. Polluting industries such as manufacturing, steel, and petrochemicals are to implement ‘green reforms’, and promote the use of low-carbon vehicles and smart-feature, while reducing waste. There’s a lot of talk about ‘green’ and environmental protection and ecological rebuilding, but like I said, the details are shaky.
The government has set a target to reduce air pollution by 10% and increase the number of ‘good air quality days’ to 87.5% in 337 cities across the country. While actual policies on how this will be achieved are vague, they have indicated that reducing carbon and vehicle emissions will play a major role.
Leaving things to the imagination
As we can see, most of the plans the government has revealed to date have been relatively vague, if targeted. The government seems more willing to allow some market-led growth and development than in the past. There are much fewer hard and fast targets in the 14th plan, unlike previous plans that have tried to peg growth rates in certain sectors or for overall GDP to specific numbers.
Major indicators of economic and social development during 14th Five-Year Plan period
This openness to the forces of capitalism is partly due to the realisation that around 14 million people will be entering the labour force over the next year, and 11 million new urban jobs will be needed to accommodate them. The government can’t provide them all, and so private business (local and foreign) will need to take the reigns. There are also clear benefits in engaging with more open trade with foreign nations without prescriptions or caveats. Trade with nations part of the Regional Comprehensive Economic Partnership (a free trade agreement between APAC nations signed in 2020) is expected to add $500 billion to global exports and increase the national income of participating nations by $186 billion by 2030.
When it comes to supposed major rivals, the government maintains its vagueness. "China and the United States, as the world's largest developing country and the largest developed country, will gain from cooperation but lose from confrontation," is a pretty clipped statement on what many consider to be the biggest rivalry of the century.
Some things, however, are not up for negotiation. Premier Li expressed in his speech that “The mainland is committed to... national reunification and opposes any form of separatist activities aimed at "Taiwan independence" and foreign interference in cross-Straits affairs.” Well.
Open to interpretation
The Economist may not be entirely wrong in its predictions. If we take into account how China has been behaving towards so-called aggressor nations (like the US and Australia), how defensively it behaves when it comes to ‘sovereign’ territory (like Hong Kong and *Taiwan*), and how the Belt and Road Initiative is clearly a scramble for resources and soft power, it’s certainly not beyond the realms of possibility that China’s long-term goal is to shore up its defenses, hoard resources, and make sure its people are well-provided for. But it should be noted that this is all it is - a prediction.
I’m not saying we can’t add two and two together here. I certainly can’t see the future, and would never claim that China has no ambitions beyond what it publicises in its chunky, overly-wordy info sheets. But we simply do not have enough information to draw concrete conclusions about China’s goals, either for itself or for the rest of the world. To be honest, even if we had the full document and open access to footage of all discussions that took place during the congress, we still wouldn’t have any idea how things would play out in the long-term. China’s true intentions and the aims of its supreme leaders are really only known to the tippy-top of the elite decision-making powers - the 7 members of the Politburo Standing Committee.
Until events unfold and China starts making actual moves, we will all be in the dark. Call me a cynic, but I don’t remember anyone predicting that things in Xinjiang would escalate to their current levels back in 2007. The only thing we can say with a vague sort of halfhearted confidence is that China intends to provide more jobs, raise living standards, and reduce carbon emissions. All while ensuring the authority of the Communist Party remains intact.
Sources
Asia Times, China’s SOEs urged to increase profitability
BBC, China's Xi declares victory in ending extreme poverty
The Economist, Five-Year Plan, The Big Target
Green BRI Blog, China Belt and Road Initiative (BRI) Investment Report 2020
People’s Daily, New changes to draft outline of China’s 14th Five-Year Plan
China State Council,Premier Li addresses key issues, plans
China State Council, Premier Li: Growth target of over 6% not low
China State Council, Premier: China, US can cooperate in many areas
China State Council, China's transport plans to bolster global trade, connectivity
China State Council, Govt policy moves from past week
China State Council, Investor access to improve openness
China State Council, Innovative SMEs to get policy boost in financing
China State Council, Importance of intl trade deal promoted
China State Council, China to build Hongqiao international opening-up hub in Shanghai
China State Council, China to fully advance rural vitalization, facilitate modernization of agriculture, rural areas
China State Council, State Council calls for green, low-carbon and circular development