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Where China will be in Five Years’ Time: Advance Analysis of the Coming 14th Five Year Plan

Thursday 29th October saw a milestone in the Chinese political calendar – the conclusion of a four-day meeting, the Fifth Plenum of the 19th CPC Central Committee. This top-level gathering evaluated the performance of the 13th Five-Year Plan (2016-2020) and set guidelines for the 14th Plan (2021-2025). The Plenum also issued a communiqué (公报) that outlined strategic goals for this period, and some beyond up until 2035.

Current details shed high-level light on coming priorities, as implementation will soon trickle down through the governmental system. This will start with announcing the national-level 14th Five Year Plan in the 2021 meeting of the National People’s Congress in March. In turn, implementation will follow with mini Five-Year Plans developed by governmental and industrial bodies throughout the Chinese administrative system (both horizontally i.e. in different sectors, and vertically, i.e. at various organisational levels.

Additionally, the Plenum also approved a 15-year ‘vision’ for development and referenced the new Dual Circulation strategy, which aims to reduce China’s external exposure to risks through securing domestic supply chains and reliance on the domestic market as a source of growth.

The communiqué identified several headline aims for different areas of domestic development:

Technology and Innovation
First and foremost, the communiqué increases governmental priority on technology and innovation even further. This focus was already a significant element of previous Five-Year Plans and other strategic priorities, which are now raised even further.

This new priority will encourage technological self-reliance, e.g. more R&D spending, encouragement of tech industries, and introduction of technological solutions throughout society.

Market Policies
China will maintain current policy priorities regarding changes to the industrial system, domestic market, and the slow but ongoing opening up to international markets and investors.

With the Dual Circulation policy, this is likely to include more sustainable ‘rebalancing’ of the economy towards increased domestic consumption and income growth, away from a focus on investment. Ending the setting of a fixed GDP growth target (as has been the case for 2020) may be one.

The communiqué mentions income inequality and rural revitalisation, which has long been a significant area of concern for President Xi.

Areas of reform in this sector to come are likely include hukou – residential rights – and the difficult issue of rural land ownership.

Regional and Urban Development
The Communiqué is expanding plans for coordinated regional development and new-type urbanization. Current policy examples are the Yangtze River Delta and Greater Bay Area Economic Regions and smart mega-cities, respectively. The 14th Five Year Plan is likely to increase attention on hitherto lesser regions, such as the Chengdu-Chongqing, Guangxi-Beibu Gulf, and Guanzhong-Tianshui Economic Zones.

A higher priority is the need to develop cultural industries and improve cultural soft power – an indication that the Party leadership understands that Chinese soft power remains significantly ‘underdeveloped’. Some Chinese soft power efforts have been received poorly and/or have been counterproductive to western audiences. These efforts at soft power are likely to slowly improve over time.

Green Policies, Energy
The promotion of green and low-carbon development is notable, following President Xi’s surprise public commitment at the United Nations in September that China would ‘achieve carbon neutrality before 2060’,. This announcement is already shifting planning in the Chinese administrative system.

Under current plans, virtually all new cars sold in China by 2035 will be either hybrids or new-energy vehicles (NEVs), an area China is looking to develop new world-level technology.

Another nationwide emissions trading scheme is likely to come in the 14th Five Year Plan. However, doing so will be a delay as the scheme was initially pledged by Xi in 2015, provisionally established in 2017, and previously announced as expected to launch in 2020.

Additionally, there was no mention in the communiqué of boosting strategic reserves for commodities and energy, something that might be expected to help ensure self-sufficiency, especially given the ‘Dual Circulation’ policy. This suggests a likely continuation of current – mainly market-driven – approaches to commodity acquisition e.g. rare earths.

Quality of Life
There will be a continued requirement to improve people’s quality of life, together with addressing China’s aging population. This will lead to new encouragement of elderly and health care, improved insurance (which has been opening up to international investment), and development of health-related activities, e.g. national parks, green spaces.

Security and Defence
The Communiqué promised to integrate development and national security. This indicates a belief that economic improvements in people’s lives will result in a happier and more content populace, such as in troubled regions like Xinjiang and Tibet. On the other hand, it might also emphasise how unrest is economically as well as politically undesirable, and therefore also provide added justification for initiating crackdowns.

There is also mention of accelerating the modernization of national defence and the army, which may increase international tensions.

International Relations
Besides the emphasis on technological self-sufficiency, China’s international situation was mentioned at only one point, described as being in an ‘important period of strategic opportunity’ arising from a ‘deep adjustment in the international balance of power’. What this means exactly is open to interpretation, but illustrates that the leadership feels the international situation is shifting in China’s favour.

As mentioned above, this important strategic level plan will slowly filter throughout the government. Organisations impacted – which include most major companies operating in China – should watch for new developments, assess detailed implications, and start to integrate likely impacts within their macro-level plans.

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