The Chinese government presented the 12th Five-Year Plan to the National People's Congress (NPC) on Saturday, setting out a broad policy framework that will guide China's economic and sociopolitical policy during the 2011-15 period.
There will be a long way to go for China to accomplish its lofty goals for economic transformation, as the long-term priorities for economic adjustment and rebalancing will inevitably clash with short-term interests in growth, IHS Global Insight China economist Xianfang Ren said in a note. The government is pushing in the right direction, but it is far from certain that they will be able to muster sufficient resources to meet the challenge.
The following are the main features of the Five-Year Plan, according to IHS:
There is one major difference between the plan document submitted at NPC and the Chinese Communist Party's proposal for the 12th plan released in October last year. In the latest document, the government has highlighted key economic and social development targets for the next five years.
Prime minister Wen Jiabao underlined the need for ensuring 'higher-quality growth", though this means the scorching pace of growth will be slowed down. "Growth will become a secondary goal compared with development, a new mandate that China will embrace as policymakers reorient domestic policies to meet the sustainability and rebalancing challenge."
The striking feature of the plan is that the government lowered the GDP growth target to 7 percent down from the 7.5 percent planned for the previous five-year plan period.
REUTERSThe government has fixed the household income growth target at 7 percent, far higher than modest targets set in the last plan. "The reorientation of policy priorities also shows in the apparently greater emphasis on household income growth as China tries to invigorate domestic private consumption; the urban and rural household income growth target is put down at 7%, the same as GDP growth, while the income growth target under the previous FYP was much more modest than the GDP target."
REUTERSThe GDP growth target has been lowered from 7.5 percent last year to 7 percent while urban/rural income growth has been raised from five percent to seven percent.
The services output as a share of GDP will go up from 3 percentage points to 4 percentage points and energy intensity will be reduced from 20 percent to 16 percent. The urbanization rate will be raised from 47 percent in 2010 to 51.5 percent in 2015.
R&D expenditure as a percentage of GDP will go up from 2 percent to 2.2 percent.
REUTERSWhile GDP will grow by around 8 percent, consumer price index (CPI) increase will be kept around 4 percent. Over nine million jobs will be created for urban residents. The registered urban unemployment rate will be kept at 4.6 percent or lower.
Also, NPC says China will accelerate the transformation of economic growth mode, boost domestic demand, give greater help to agriculture and put greater efforts in social progress and people's livelihood.
"The year 2011 could be the start of a period of moderation for China in terms of economic growth, as slower growth is required for the country to conduct the much-needed readjustment and rebalancing in view of rising external demand uncertainties and growing input-supply constraints," says IHS.
REUTERSEven though the GDP growth target for 2011 is set at the same level as in 2010, at 8 percent, there is already a clear shift of monetary and fiscal policy from expansive to normalization, with the government hitting the exit door of stimulus, HIS says.
The growth of M2, the broad money supply, will moderate to 16 percent from a 17 percent target for 2010 and 19.7 percent actual growth last year. The central government deficit will be cut back by 150 billion yuan ($22.85 billion), nearly an 18 percent fall from the 2010 target as the government wraps up the 2009-10 stimulus cycle. The local budget deficit, however, is still maintained at 200 billion yuan, which, as in the previous two years, shows up as local municipal bonds issued by the Ministry of Finance.
REUTERSThough President Hu Jintao's earlier promises on addressing widening inequalities and creating a "harmonious society" have not delivered much success, the current plan gives a sense of direction, according to the IHS analyst.
"There does seem to be a growing consensus that this time it really has to be different. The global financial crisis drove home the fact that, as it stands, the economy is fundamentally unsustainable, and there will at least be more effort spent in reaching the targets. The income growth target of "above 7%" is particularly promising, given it places income growth at the same target range as overall growth, whereas previously incomes have lagged, contributing to an increasingly small share of consumption as a percentage of GDP."
REUTERSIt remains unclear whether Beijing's lofty rhetoric will achieve the desired results given political realities, the analyst says. "Since reform and opening up of the 1970s, power has become increasingly decentralized in China meaning that the implementation of nationwide policy now necessitates a more prolonged process of consultation. "
Also, President Hu Jintao and Premier Wen Jiabao are due to step down at the next Party Congress, and they will only be responsible for realizing the first two years of the plan, according to Xianfang. "As jockeying for the 2012 leadership transition intensifies over the course of 2011, senior Chinese politicians may be tempted to postpone painful reform initiatives."
REUTERS
