Liu He on China's New Transformation Trail

(Beijing) – Fatigue from long hours of work was evident in Liu He's face when he recently met Caixin reporters in a Beijing hotel. But as the conversation deepened, and Liu described a far-reaching plan for China's progress, the facial lines slowly faded.

Liu is a vice minister at the central government's Office of the Central Leading Group on Financial and Economic Affairs. He agreed to the October 28 interview after playing a key role in drafting China's proposed 12th Five-Year Plan, which takes effect next year.

The proposal had been released just a day earlier by the Central Committee of the Chinese Communist Party.

And the interview with Liu broke new ground. Prominent members of five-year plan writing teams rarely expound to the Chinese media, much less the independent media, so soon after completing a final draft.

In the course of preparing the plan, a task force headed by Premier Wen Jiabao spent six months gathering input from tens of thousands of experts in 67 government departments, as well as several foreign economists.
Among the experts at the head of the table was Liu, 58, who had helped draft four five-year plans in the past.

China has seen plenty of twists, setbacks and change since the first five-year plan was released in 1953. But little has changed about the government's economic planning model, which plots a revised course every half-decade that requires long hours of work and careful attention to detail by government economists such as Liu.

Both the 11th Five-Year Plan that expires December 31 and the plan to be launched in 2011 are tightly bound to China's future development.

In the interview, Liu said the new plan focuses on boosting domestic consumption, improving everyday lives, giving the government a greater role in social support, and facilitating urbanization. He spoke exclusively to Caixin about what to expect, and why. The interview follows:

Caixin: What new factors were considered while drafting the 12th Five-Year Plan?

Liu: First, the international background is different. The external environment has undergone major changes. We were hit by the international financial crisis, and the international market has undergone major changes in aggregate demand.

The most obvious and most prominent consideration for the 12th Five-Year Plan is, where will the global market go in the future? And an important question is, how do we create a large domestic market?

From a domestic perspective, according to World Bank calculations, China has become an upper-middle income country. This year, per capita gross domestic product (GDP) will exceed US$ 4,000. We're concerned about how to avoid the so-called "middle income trap."

From a global perspective, only a few countries such as Japan, Korea and Singapore have crossed this bridge easily since World War II. Most countries have stagnated. How can China cross over this potential pitfall and move forward to a higher level? Doing so would require that the nation fix a very clear development strategy. Then it can achieve its goal of being moderately well-off.

Caixin: What are key words in this proposal?

Liu: The proposed 12th Five-Year Plan places special emphasis on "theme" (主题) and "thread" (主线), with scientific development (科学发展) being the theme and transformation of the economic growth model the thread. Transforming the economic growth model is the key phrase woven through the 12th Five-Year Plan proposal.