On Thursday, the Fifth Plenum of China's 19th Party Congress which was held to discuss the proposals for the 14th Five-Year Plan, concluded after 4 days of discussions and China unveiled the first glimpse of Beijing's economic plans for the next five years, promising to build the nation into a technological powerhouse as it emphasized quality growth over speed.
The post conference communique released today provided a brief summary of the proposals. The summary reiterated the direction towards higher quality growth, laid out non-numerical goals over the long term, and particularly highlighted the importance of innovation and a push for market reform. A more detailed report on the 14th Five-Year Plan will be released during the National People's Congress (NPC) in March 2021
As previewed on Monday, the Communist Party’s Central Committee Thursday stressed the need for sustainable growth and also pledged to develop a robust domestic market. Of note: the communique released by state media following a four-day closed-door meeting did not specify the pace of growth policy makers would target, a first for a nation which in past was obsessed with its goalseeked GDP number.
Yet even though the plan doesn’t mention a specific rate of growth for gross domestic product, analysts said the government remains ambitious in its outlook: "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 quoted by Bloomberg. "China did not abandon GDP targeting, it’s just expressed in a more subtle way."
Below are the main points from the plenum, via Goldman Sachs:
The summary reiterated the increasingly challenging environment for development and rising uncertainties in external conditions, and highlighted major problems at the current phase of development, including development still unbalanced and insufficient, the lack of innovation, still substantial income inequality, and further room for improvement in environment protection.
In contrast to the 13th Five-Year Plan where a “doubling income” goal was emphasized, the summary of the 14th Five-Year Plan today didn't mention any specific numerical goal, and re-emphasized the direction towards “higher quality growth." Regarding key economic goals for the 14th Five-Year Plan, the proposals particularly highlighted the importance of innovation and a push for market reform, facilitation of internal circulation through expanding domestic demand strategy and supply-side structural reform, significant improvement in household income and narrower income inequality in urban and rural areas, and “high-quality opening up” (trade and financial liberalization). The summary also mentioned long-term goals through 2035, for instance, GDP per capita reaching the level of middle-income developed economies and expansion in middle-income population.
The key elements highlighted in the summary are not new and have been mentioned previously by policymakers. From an economic perspective, this means boosting total factor productivity and rebalancing economic development across sectors/regions. Although the Chinese government has been calling for a transition in the development model for a number of years, given that the broad external and domestic environment has changed, we think the government is likely to accelerate the pace of relevant reforms in the next five years, to achieve sustainable, balanced and high quality growth and enter the high income group from the upper middle income group.
Over the coming months, the National Development and Reform Committee (NDRC) will consult specialists and other government ministries to prepare a more detailed draft of the 14th Five Year Plan. It will be submitted to the National People’s Congress (NPC) for final approval during the “Two Sessions” in March 2021, which would be the next key event to watch out for. Detailed plans on a sectoral level from ministries will likely be released several months after the “Two Sessions”.