China's 12th five-year economic plan (2011-2015)

[中国万岁-ProsperThroughCo-]

From SCMP

4 trillion yuan to boost key industries

Next 5-year plan aims for 'inclusive growth'
Cary Huang in Beijing
Oct 15, 2010

Beijing will spend more than 4 trillion yuan (HK$4.6 trillion) on several key industries and inland regions as part of the new five-year economic plan, according to two officials involved in its drafting.
The central government will also lower the economic growth rate and focus more on structural adjustments in its blueprint for 2011 to 2015.

While it appears to duplicate the 4 trillion yuan stimulus package adopted two years ago to cushion the economy from the impact of the global financial crisis, the new programme also aims at achieving what President Hu Jintao recently coined as "inclusive growth" - which essentially refers to a more balanced approach to growth, according to economic planners.

Communist Party leaders will meet today for their annual four-day session at the Jingxi Hotel in western Beijing, where debate and formal approval of a draft of the nation's 12th Five-Year Programme is expected to top the agenda.

The current five-year plan ends this year and a draft of the next one, which outlines the principles rather than gives specifics, will be considered by more than 350 Central Committee members and alternate members who attend the gathering.

The final document will be worked out by the government in the coming months before Premier Wen Jiabao tables it for official endorsement at March's annual session of the National People's Congress, the country's top legislature.

Both officials said the government would spend more than 4 trillion yuan in the five-year period to provide financial support, including tax cuts and exemptions, to nine key industries - new energy, new materials, information technology, biology and new medicine, energy conservation and environmental protection, aerospace, marine, advanced manufacturing, and hi-tech services industries.

"More money will be spent in support of the development of these key industries, seen to be strategically significant for the national economy and to upgrade its competitive margin on the global stage," said Liu Qin , deputy director of the Xian Municipal Development and Reform Commission. As a regional planner, Liu and other regional officials are involved in the drafting of the local and national five-year plans. The other planning official declined to be named.

The next five-year plan would focus on two categories, industries and regions, which marked a significant shift from the past development strategy of concentrating on growth, Liu said. These areas would be the two main targets of Beijing's investment policy.

The central government has approved several regional economic zones and urban expansion plans in the past two years.

The government was also working on a plan to replace its 10-year Go-West programme, which would expire by the end of the year, said Liu, who also heads Xian's municipal office in charge of the Go-West programme. According to Liu, these regional development plans will be incorporated into the national master five-year plan.

Industry and Information Technology Minister Li Yizhong said last week the nation's industrial sector would focus on structural adjustment and transformation during the 12th five-year plan.

Li said his ministry would strengthen work on saving energy and reducing emissions, speed up elimination of backward production capacity, promote high technology and industrial upgrading, and encourage companies to improve product quality and create their own brands.

Hu's new "inclusive growth" catch-phrase would be included in the 12th five-year plan document, planning officials said.

In a speech to an Asia-Pacific Economic Co-operation meeting in Beijing last month, Hu said the goal of "inclusive growth" was to spread the wealth generated by economic growth among all and to achieve balance in economic and social progress.

"Inclusive growth" was different from the break-neck, winner-takes-all and no-matter-the-cost pursuit of growth that was the norm of most major economies; rather, it was an economic growth pattern that would benefit every citizen in the nation, even the poorest.

Government economists said Beijing would increase funding for subsidised housing, medical care reform, education and other social welfare.

International institutions also said changing the growth model was expected to be the main theme of the coming five-year plan.

The International Monetary Fund said the Chinese economy was gearing up to change its growth model from an export-driven economy to one driven by domestic consumption.

"There has been a growing recognition within the top leadership that the old growth model is no longer sustainable, not just economically but also politically," Ma Jun, chief China economist at Deutsche Bank, said. "We expect the forthcoming plan to focus less on growth rates and more on structural adjustments."

Goldman Sachs expects the five-year plan to be an extension of major themes in the current plan, with some new focus areas. It identified five top themes: income redistribution and social welfare; improving consumption; industry efficiency and resource conservation; research and development and hi-tech upgrades; and urbanisation and inland migration.

Unlike the current stimulus package, which was aimed at boosting growth amid the global downturn, the new plan would target sustainable and balanced growth at the sacrifice of the speed of growth, economists said.

The two-year stimulus plan in late 2008 announced unprecedented bank lending that helped the nation post annualised growth of about 10 per cent during the crisis and helped it leapfrog Japan to become the second-largest economy in the world.

However, planners and economists said the central government would lower the annual GDP growth target from 7.5 per cent in 2006-10 to 7 per cent in 2011-15. They expect the actual economic growth in the period to exceed the goal, but it will be difficult for China to achieve two-digit growth.

Citigroup, in a recent report, said it expected Beijing to slow down the GDP annual rate along the same lines.

JPMorgan forecast annual growth rate would reach 8 per cent during the 12th Five-Year Programme period.

The beneficiaries

Key industries that will gain from Beijing’s 4 trillion yuan injection in the new five-year plan:

New energy
New materials
Information technology
Biology and new medicine
Energy conservation and environmental protection
Aerospace
Marine
Advanced manufacturing
Hi-tech services