After months of speculations, unofficial drafts and countless predictions – China’s 14th 5-Year-Plan is finally here. At the beginning of March, over 5000 of China’s social, political and professional elite met Beijing to finalize and officially launch this latest national roadmap.
The plan’s 142 pages elaborate on China’s agenda and long-term goals in the context of future development towards a better, stabler and more efficient economy and society.
For internationals doing business in China or with China, this plan should serve as a drawn-out path, clearly showing the direction in which China is headed. And like all the plans that have come before it, this 5-Year-Plan too will shape and inform China’s business landscape across a myriad of sectors.
Image source: Xinhua
5-Year-Plan – 5 Main Pillars
Long-term economic growth & improvements to wellbeing
In this sense, the current 5YP is somewhat historic. For the first time in China’s history, the country is not focusing its plans around a specific and targeted amount of GDP growth. Instead, this plan claims that China aims to consolidate growth within a “reasonable range” and set specific GDP goals annually, in order to ensure a stable and more longer-term development.
And while these plans are substantially oriented in the long term, large parts of the plan put an emphasis on various micro components. For instance, specific targets such as raising the urban population, increasing employment and raising the average life expectancy; along with promoting the education and health systems, improving the wellbeing of the Chinese people, speeding up labor productivity, improving domestic manufacturing conditions and boosting technological innovation.
Therefore, some of China’s ambitious goals are not confined to the next five years but in fact for the next 15 years.
Self-Sufficiency and Global-Reliance
This balancing act is reflected in the plan’s main premise, an approach called the Dual Circulation Strategy which aspires to govern and dictate China’s future economic growth. This somewhat “paradoxical” notion refers to a new economic model that consists of two complementing yet opposing systems.
The model encourages increasing the reliance on local production, distribution, and consumption by enhancing Chinese technological self-efficiency and independence on the one hand. Whilst on the other, maintaining an open-door policy towards foreign investors who can support China in fulfilling its vision, mainly by lowering tariffs; mitigating trade barriers; improving export policies and mutual investment channels; organizing exhibitions etc.
China’s dual commitment to the internal and external cycles indicates that it is not abandoning its interests outwardly, but rather that it still has every intention of nurturing global business relations and incentivize foreign investments.
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Innovation and advanced manufacturing
China’s logistical vulnerability during the Covid-19 crisis and the aggravating relations with the US has reaffirmed the vitality of innovation in China’s economic evolution. And now more than ever China is striving to cultivate a burgeoning tech sector, and this is being felt in the country’s 7% annual growth in R&D spending. This will enable China to enhance its competitiveness and value, reduce its dependency on overseas markets, and increase local consumption.
The main areas that are going to benefit from these massive governmental investments are AI, neuroscience, biotechnology, medicine/health and information technologies. One noteworthy focus is the digital economy, which is part of a bigger vision called “Building Digital China”. But with that said, China is still seeking to facilitate operations in the digital economy sphere by establishing market rules and a standardized policy environment.
The development of the “real” economy in China is not entirely overlooked either. China’s keen innovation-driven motivation also applies to the advancement of the manufacturing sector, and is focusing on various priority areas with robotics, high-end medical equipment, and smart vehicles making up a few of the focal points.
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The words “energy” and “climate” appear in the plan’s outline about 110 times and are conceived as part of China’s ambitions to enhance the “progress of ecological civilization”. In other words, according to the plan, about 25% of the indicators on economic and social development are related to environmental protection.
To measure China’s progress in combating climate change, it has set several specific targets such as:
- To reduce by 13.5% the nation’s energy consumption per unit of GDP
- To reduce by 18% the CO2 emissions per unit of GDP
- To increase the share of non-fossil energy in total energy consumption to 20% by 2025
This approach presents new business opportunities for diverse sectors such as the energy sector, industrial sector, environmental protection industries, and even financial services and professional services related to carbon emissions peak and carbon neutrality.
Optimizing the business environment
Do you own or manage a business in China? Then this one’s for you. The new plan aims to better the business conditions for private businesses in various ways, for instance, streamlining financial and taxation systems, creating a higher-standard open economy (including anti-monopoly policies), increasing coordination between different-level governmental bodies and implementing major developmental strategies (e.g., economic zones).
As 2021 continues to transform our world order, China’s 14th five-year-plan (2021-2025) bears extraordinary meaning. And of course, any shift in strategy by the world’s second-largest economy will have ramifications on both foreign and global businesses in China and far beyond it.