China’s Next Five-Year Plan and the Challenges Ahead

来源: CHINA FOREX 2019 Issue 4 作者:Mu Zhiqian
The fundamental issue will be maintaining high-quality development after...

The Chinese economy follows the rhythm of the global economy as well as a five-year development plan that sets a broad range of goals and priorities. At the end of next year,the 13th five-year plan draws to a close and a new set of objectives and guiding principles will be put in place.

The fundamental issue for the 14th five-year plan will be maintaining high-quality development after more than 30 years of rapid growth that averaged about 9% a year. In 2019,China’s growth rate could top 6%,and an assumption of between 5% and 6% would be reasonable for the five years starting in 2021. Higher quality development requires domestic economic restructuring and that is a lengthy process. In the meantime,Sino-US frictions linger,bringing numerous uncertainties. Growth has been trending lower in recent years,but if we compare the latest growth figure with those of most of the world’s economies,the result is not so disappointing after all.

Nonetheless,there are a number of challenges to be faced over the next five years. There has been a dramatic change in China’s labor market,and the nation’s aging population is becoming a major concern. Each year the labor force declines by two million to three million. Meanwhile,labor costs are rising about 12% annually.

China’s industry remains near the lower end of the global value chain despite significant efforts to upgrade production. More must be done to achieve this upgrading,but China is facing pressure from two directions at once. Reindustrialization in the developed world is attracting high-end manufacturing to those countries while other emerging economies are luring the lower end manufacturers that once were the mainstay of the Chinese economy. From the perspective of the demand side,growth in investment has declined sharply from 30% to 6%. Domestic consumption,while strong and packed with potential,is no swift replacement for exports,which once powered the nation’s economy ahead. China’s economic planners need to chart a course around  these obstacles to maintain a steady expansion.

China’s advantage is market capacity – its key to future development. China has an enormous consumer market with a population of 1.39 billion,more than 100 million companies and a skilled workforce of more than 170 million.

Recently,China held the second China International Import Expo in Shanghai,and some 250 of the top 500 global companies attended. Among them were 120 companies from the US,an increase of 18% over the previous year. That suggests that despite the domestic obstacles and the ongoing spat with Washington,the China market hasn’t lost its luster. Those farsighted firms that visited Shanghai recently seemed to be saying they see further progress ahead over the course of the next five-year plan.