Oct 30, 2020 04:48 AM

China Pledges Quality Growth, Tech Powerhouse in 5-Year Plan

Morning commuters wearing protective masks walk past Chinese flags displayed along Nanjing Road in Shanghai
Morning commuters wearing protective masks walk past Chinese flags displayed along Nanjing Road in Shanghai

(Bloomberg) — China unveiled the first glimpses of its economic plans for the next five years, promising to build the nation into a technological powerhouse while emphasizing good-quality growth over speed.

Initial details divulged by the Communist Party’s Central Committee Thursday stressed the need for sustainable growth and pledged to develop a robust domestic market. The communiqué (link in Chinese) published by state media following a four-day closed-door meeting didn’t specify the pace of growth that policymakers would target.

The new plan elevated China’s self-reliance in technology into a national strategic pillar, a move signaled by officials from President Xi Jinping down in the lead-up to the meeting. Central to that endeavor is self-reliance in semiconductor chips, the building blocks for innovations from artificial intelligence to fifth-generation wireless networking and autonomous vehicles.

Laying out their vision for the next 15 years, officials said “making major breakthroughs in core technologies in key areas, China will become a global leader in innovation,” according to the communique published by the official Xinhua News Agency.

Beijing’s efforts are gaining urgency as the U.S. seeks to contain the rise of its geopolitical rival. The U.S. has pressured allies to shun equipment from Chinese tech giant Huawei Technologies Co., barred dozens of China’s largest technology companies from buying American parts, and even slapped bans on ByteDance Ltd.’s TikTok short-video app and Tencent Holdings Ltd.’s WeChat multipurpose platform.

“Technology is the key now in the next area of development of China,” said Wang Huiyao, an adviser to China’s cabinet and founder of the Center for China and Globalization. “It’s a key area that China wants to give more attention, more resources and more development. I think that’s basically for China’s development in the future.”

Growth Outlook

Unlike the last five-year plan, which sought to achieve “medium-to-high growth” to build a “moderately prosperous society,” this plenum was expected to focus on the quality of growth rather than the pace. In Thursday’s statement, officials pledged to stick to a strategy of boosting domestic demand and opening up the economy over the next five years.

Even though the plan doesn’t mention a specific rate of growth for gross domestic product, analysts said the government remains ambitious.

“The leadership still expects the size of the economy, household income as well as GDP per capita to reach a ‘new milestone’ by 2035,” said Raymond Yeung, chief greater China economist at Australia and New Zealand Banking Group. “China did not abandon GDP targeting. It’s just expressed in a more subtle way.”

U.S. Tensions

The document gave a nod to the “complicated international situation,” a phrase that has become party shorthand for the “America First” policies of U.S. President Donald Trump.

China will “basically form a new system of open economy at a higher level” in the next five years, according to the statement. While that repeats past promises of increased foreign access, the plan puts a timetable on making progress.

Along with the heightened U.S. tensions, a virus-battered world economy has prompted officials in Beijing to chart a course that draws on domestic resources and consumption to ensure growth.

While that strategy — known as “dual circulation” — was mentioned twice in the communique, there wasn’t any specific explanation or detail on what that entails. The nation needs to “smooth the domestic circulation, facilitate dual circulation at home and abroad, comprehensively promote consumption and expand room for investment,” according to the statement.

The party’s Central Committee — a group of 200 top leaders — also sketched out goals as far as 2035, pledging that the nation’s carbon emissions will peak and start to decline in that period while raising per capita GDP to the status of a moderately developed country.

The plans are expected to be fleshed out in coming months before approval by China’s parliament next year.

Other highlights from the communique:

Opening-Up: China has been gradually relaxing its control over the currency and capital flows, including taking steps to liberalize the yuan following its recent appreciation.

Environment: With the world’s largest carbon footprint since 2004, China will aim to peak and then gradually lower its total emissions. The ruling party called for a significant green transformation of production and people’s lifestyles.

The Central Committee said it would seek a reasonable allocation of energy resources and improve efficiency. The world’s biggest food producer and consumer also vowed to speed up modernization of the farming industry, ensure national food security and improve agricultural quality and competitiveness.

Military: The party laid out plans for greater synchronization between economic and defense development, supporting Xi’s goal of building a world-class military by 2049. The communique called for speeding up defense modernization and to “realize the unity of a prosperous country and a strong military.”

Hong Kong, Taiwan: Reaffirming its commitment to the “peaceful development” of ties across the Taiwan Strait, the party vowed to maintain “long-term prosperity and stability” in Hong Kong and Macau. The brief readout included a line calling for the “reunification of the motherland,” whereas a similar document five years ago emphasized economic cooperation and benefits for Taiwanese residents and companies.

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