China's 13th Five Year Plan: Development Agenda
Social and economic plans embodied by the new FYP were implemented in China in 1953 and based on the Soviet Union model. They are drafted and implemented nationally and regionally. Today, people wonder whether those plans don’t have an expiry date, just like the Soviet Union’s ones.
Given this difficult and precarious economic and social context, it is necessary to build a stronger and more stable economic growth focused on long-term and sustainable development throughout a strong emphasis on reform and innovation. Consumption, urbanization and reasonable growth will be fostered. This provides new opportunities and challenges for foreign invested firms.
The following measures will be implemented:
On a national scale
The central 5 years plan focuses on growth and social development. It is drafted by the National Development and Reform Commission (NDRC).
Economic targets – focus on growth – average growth target of 6.8 %:
The Central 5 Years Plan also focuses on more structural aspects, such as:
- Create fewer state-owned firms in order to attract foreign shareholders
- Focus on domestic consumption
- Focus on innovation to find new growth engines: reinforce intellectual property protection
- Reinforce the anti-corruption campaign for further transparency
On a local scale
They will be implemented one month to one year after the national plan and will have a sharp impact on incentives programs and business ecosystems by being much more precise and having much more specific targets than the central plan.
Local plans focus on:
Impacts on foreign firms and multinationals:
This new plan can have a strong impact on business models of foreign firms established in China and will generate broad growth opportunities. Indeed, government support will be provided depending on the plan’s provisions. Foreign firms must therefore carefully assess those changes and communicate with local and specific industry regulators, which are generally more easily reachable than general authorities.
Focus on the 6.8% growth target:
Given the fact that this figure is the worst since 2009 and that nobody believes in it, investors worry that this could slow down the transition to a “moderately prosperous society”. According to Premier Li Keqiang, a 6.53% growth is needed for these goals to be reached. A lower growth range would embody the authorities’ acceptance of slower growth and reform while the higher growth range would mean a preference for stimulus, which might encourage unnecessary productions and damage the environment and people’s health.
Focus on the environment:
The plan will further shape up the Chinese climate policy with a special focus on cleaner coal technologies and reduction of greenhouse emissions. Environmental and energy targets are set up such as the reduction of oil consumption, the development of electric vehicles etc. This will have strong impacts on industrial sectors. Indeed, overcapacities in glass cement, auto and steel industries is becoming a major problem in China. It has, therefore, been decided that in 10 years, China will have 3 to 5 large steel companies against 20 today.
The plan was approved by the Fifth Plenum but details won’t be released until March 2016. The Fifth Plenum is a particular meeting of China’s top leaders focusing on the finalization of details of the 13th FYP. The plan is expected to be implemented within 2 years and officially approved by the National People’s Congress in March 2016. Updates will be posted on an official website and public participation will be limited to drafts based on shareholder’s comments and channel on WeChat to post comments.
This 5 years plan comes with very high expectations given the current turmoil and shift within the Chinese economy. Foreign investors and multinationals must carefully assess the changes linked to growth targets and trade policy in order to adapt to a new moderately growing market.