Rodney Chan, DIGITIMES, Taipei [Monday 14 February 2011]
The 12th Five-Year Plan that China is implementing next month has a very different focus than those in the past, namely it is aiming at a more balanced development of the country by restructuring its industries and regional economy, according to Digitimes Research senior analyst Joanne Chien, author of the Special Report, "Overview of China's 12th Five-Year Plan." The key point is to let more people enjoy the fruits of the country's economic boom.
Q: China's planned economy has been following a series of five-year plans. The latest to be implemented in March is the 12th Five-Year Plan. What is its significance and what are the goals?
A: The fast economic growth has created a lot of billionaires in China. But in such a huge economy, there has been an obvious imbalanced development in various aspects: the eastern regions have been developing much faster than the western regions; the industrial and economic structure is lopsided; human resources are lacking in many areas; and the environment has long been a victim of economic development.
Therefore, the 12th Five-Year Plan has a few key missions: narrowing the gap between urban and rural areas, and between the rich and the poor, via urbanization projects; building up the competitiveness of key industries; creating "green" society and industries; expanding its pool of talent; and having core values take deep root. The goals are to achieve annual GDP growth of 7% throughout the five-year period, with the GDP per capita rising to US$6,500-7,000 by the end of the 12th Five-Year Plan from US$4,050 recorded at the end of the 11th Five-Year Plan. By 2015, the final consumption rate will reach 55%, up from 48.6% in 2010, and the production value of its new strategic industries will account for 8% of its GDP.
A close look at China's five-year plans since the country opened its doors, we can see that it managed to achieve its goals earlier than scheduled in each of the plans. With the 12th Five-Year Plan focusing on expanding domestic demand, we can expect huge business opportunities to arise in the next five years.
Q: Why is domestic demand important, and what is the Chinese government doing to improve domestic demand?
A: Over the past few years China has relied chiefly on an export economy. The increase in its people's incomes has barely been able to catch up with its GDP growth. There have been a lot of complaints from the people about things getting more expensive and unaffordable. It is time for the Chinese government to find ways to redistribute the country's wealth.
In order to achieve this goal, China is actively promoting urbanization, with a goal to have 52% of the country urbanized in 2015 against 48% in 2010. This is meant to promote the service sector and increase employment, which will in turn boost related investment. The government will make sure the people's livelihood will improve. Also, by improving the transportation and logistics systems, the Chinese government hopes to boost the industrial development of western regions. In the next five years, China hopes to see its people's income double.
Q: China has identified some key industries for development in the 12th Five-Year Plan. What are they, and why is the China government choosing them? What are the projected revenues from these new industries?
A: In some of the previous five-year plans, China was looking at a very broad development for a wide-range of industries, but the results were not ideal. The 12th Five-Year Plan is narrowing the scope, grouping various sectors into seven key industries: energy savings and environmental protection; next-generation IT; biotechnology; high-end assembly and manufacturing (e.g. aerospace); new energy sources; new materials; and alternative energy-powered automobiles. This will create a more obvious "cluster" effect enabling a clear focus for investment and policymaking.
However, as China flexes its economic muscle and its domestic market expands, it needs not only to elevate its existing industries' competitiveness to international levels, but also establish its authority in the world's emerging industries, such as cloud computing, Internet of Things (IOT) and green industries. It is leveraging the huge size of its domestic market and its policies to try to attain a say in the making of standards and control of key technologies. It is clear that China is aspiring to become both an economic powerhouse and an industrial giant.
In terms of production value, the seven key emerging industries will account for 8% of China's GDP in 2015 and 15% in 2020.
Digitimes Research senior analyst Joanne Chien
Photo: Digitimes archive