China s Priorities for the Next Five Years

Posted in July 23, 2010 ¬ 3:09 pmh.admin2,492 Comments »

As the drafting process for China's Twelfth Five-Year Plan (12th FYP) for Economic and Social Development (2011-15) continues, a clearer picture of China's economic, industry, and social objectives—and the policy guidelines that will be used to achieve these goals—has emerged. The plan, which lays out national social and economic policies for the next five years, will focus on restructuring the country's economy to rely less on exports and fixed investment. Other policy objectives of the plan will include developing new energy sources, increasing energy efficiency in industry, and correcting imbalances in education, healthcare, housing, income distribution, and social security.

Top priorities for the 12th FYP

The 12th FYP is expected to make several major changes to China's economy. According to statements from senior PRC government officials, key areas for reform will include:

  • Economic restructuring China will focus on shifting economic growth away from reliance on exports and investment toward domestic consumption. The drop in demand for China's exports since the economic crisis highlighted for PRC regulators that relying on Western consumer demand to sustain domestic growth is untenable.
  • Industry structure Industry-related policies will aim to accelerate the growth of China's services industries. Though no targets have been announced, PRC regulators will look to increase the proportion of services industries in the overall economy from the current 43 percent. Policies will favor the development of the outsourcing, banking, insurance, e-commerce, logistics, and supply chain management sectors. Industries that suffer from inefficiency or overcapacity—such as cement and coal—will remain targeted.
  • New energy The plan will set capacity quotas for four types of new energy: hydro, nuclear, solar, and wind. The PRC government reportedly aims to have a wind energy capacity of 90 gigawatts (GW) and nuclear energy capacity of 40 GW by the end of 2015.

Policy goals

FYPs typically continue long-term economic and social policy goals from previous plans. Many social and economic goals listed in the 11th FYP, such as minimizing urban-rural income disparities, address long-term challenges. The 12th FYP will revise targets for these goals.

  • Economic growth Maintaining a stable economy and improving living standards remain priorities. According to PRC media reports, policymakers have set an average economic growth target of 7 percent for the 12th FYP, down from 7.5 percent in the 11th FYP.
  • Urban and rural development Increasing urbanization, narrowing the income gap between urban and rural citizens, and connecting China's cities with rural areas remain top concerns. A government economist recently said that China would invest up to ¥7 trillion ($1 trillion) to develop urban infrastructure, including ¥700 billion ($102.5 billion) on urban rail transit during the 12th FYP period.
  • Energy efficiency China will set policies to achieve two major energy targets by 2020: reducing carbon intensity by 40-45 percent of 2005 levels and increasing the use of non-fossil energy to 15 percent of primary energy consumption. Because China is behind on its goal to reduce energy intensity, experts speculate that the country might have to strengthen its energy targets in the 12th FYP to reach these long-term targets.
  • Basic public services Improving social insurance, healthcare services, and education remains a policy goal for the 12th FYP. In May, the State Council approved the Medium- and Long-Term National Educational Reform and Development Plan (2010-20), which aims to boost investment in China's education system to 4 percent of gross domestic product by 2012, up from the current 3.48 percent. Similarly, the 12th FYP may include new targets for healthcare spending.
  • Regional development Since the 9th FYP, regional development policies have focused solely on generating rapid economic growth in underdeveloped regions in central and western China. The 12th FYP will seek to encourage more balanced growth between China's developed and underdeveloped areas.

China Business Review July 2010


China Weekly News

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