China’s New 5 Year Plan

Twelfth Five-Year Plan: Overview

China’s Five-Year Plan for National Economic and Social Development is a pivotal tool used by the government to execute its development objectives by mapping out in five-year cycles the country’s future progress via guidelines, policy frameworks, and targets for policy-makers at all levels of government. When outsourcing, the social and economic atmosphere of the country is extremely important. China’s upcoming five year plan is aimed at creating a more sustainable platform, not just for their manufacturing, but for their society as a whole. The Twelfth Guideline (China’s most recent five year plan) will enact a series of social and economic developmental initiatives by emphasizing more egalitarian wealth distribution, increased domestic consumption, and enhancing social infrastructure and social safety nets.

These ideas are further being implemented through policies and initiatives such as: the increase of research and construction of large-scale hydropower plants in southwest China, enticing foreign investment in modern agriculture, high-tech, and environment protection industries, and additionally converting coastal regions into high-end manufacturing and more service sector oriented development. With this new plan, China is also trying to change their overall culture by opening up their markets more to foreign investment. This increased inclusion of foreign investment will also help China’s relationships with its main trading partners, a tactic to help westernize their culture and show more interest in the new initiatives being shown in the global market.

Changing the Plan

The fundamental change that this plan is trying to create towards China’s growth model is the reduction in over reliance on investments and exports, diverging to consumption-led growth.  This change in focus is key if China wishes to steer towards sustainable growth.   These changes being implemented will reduce the large global trade and foreign exchange imbalances that have led to China’s strained relations with its primary trading partners.

Moreover, as China implements and continues inward growth, more policies that support a lower but steadier GDP growth rate, consumption-driven growth, upgraded industries, and strengthened indigenous drive, economic growth will inherently increase. Unlike recent 5-year plans, China has explicitly mentioned the main objectives of this new plan and the three key themes that they will be trying to follow: economic restructuring, social equality, and environmental protection. With the adherence to these themes, China wishes to slow the rapid growth seen in the past and generate more sustained growth that will benefit all classes of people.

Government Aid

Some incentives being utilized for the achievement of these goals include the use of manufacturing subsidies and tax-breaks intended to speed up development and create a better high-end manufacturing industry. Three key sectors that are expected to benefit from these developments include: hydro and nuclear power, information technology, and power grid technology. These sectors are directly relevant to manufacturing and their improvement and derived efficiency will only improve manufacturing and lower overall costs. Not only will subsidies be given for structural improvements and energy efficient facilities, but these instillations will be recommended by the government to foreign investors as part of China’s overall effort to boost the energy and technology sectors.

With employment and the services being such a huge part of the manufacturing culture, some changes can be expected with the regulation and increase of wages. Increased costs could result from the increased minimum wage, tax increases, raw material resource price reforms, along with environment-related taxes. But, with the increase in price also comes an increase in quality and quality control. Foreign business can expect the government to continue opening up and making China’s services more readily available.

Our take on China’s 5-year plan coming up in the following post…here

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