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Chinas 12th Five Year Planor how to turn an oil tanker
around
January 2011
Alexander van KemenadeSenior Analyst, Access ChinaEconomist
Intelligence Unit
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Report card: The 11th Five-Year Plan (2006-2010)
Economic growth/jobs A+ Beat previous GDP growth records,
exceeding target by 2007
Economic rebalancing
External imbalances D Made token efforts to appreciate currency
and abolish export subsidies in beginning, but trade surplus
swelled to unprecedented levels in 2007. Efforts were abandoned
entirely during economic crisis. Small signs of progress noted
recently.
Excessive investment D Minimum effort to address distortions in
financial system eg. interest rate and financial services
liberalisation. Economic stimulus brought credit and investment
growth to unprecedented levels.
Innovation- and services-based growth
C Some technological breakthroughs (worlds fastest
supercomputer) were made, but copycat culture is still pervasive
and intellectual property is still a concern.
Inclusive growth
Boosting farm incomes B- Continued with rural fiscal reforms,
with some effect. Food prices also allowed to rise (to some
degree), thus increasing farm incomes. Rural governance remains
exceedingly poor.
Reducing regional disparities
A- Invested substantially in inland and western infrastructure.
Economic growth has gradually shifted inland
Social security expansion B+ Enacted a labour law, although
enforcement is patchy. State-subsidised health insurance now nearly
universal, first nine years of education now free.
Environment
Energy intensity of output B Target reached, mainly by
consolidating heavy industry (50% of targeted closures reached),
but helped by last-minute blackouts.
Pollution D Targets for reduction of SO2 emissions and Chemical
Oxygen Demand were reached. However, scope of targets was
unambitious. Overall air quality in cities worsened, and a number
of shocking environmental disasters were observed.
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China in 2011: Planning for a structural shift
From quantity to qualityUnemployment less of a concern than in
the pastHowever, growth imperative remains
Chinese economy becoming more normalLabour market developments
suggest surplus labour is nearing exhaustionInflation now a
permanent concern
Growth will be harder to come byDemographics, shift from exports
to domestic demand, gradual erosion of competitivenessPressure to
climb value chain
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From 11th to 12th Five-Year Plan
Key themes unchanged, slight shift in focusEconomic rebalancing
Stronger wording
Establish a managed floating exchange rate system determined by
market supply and demandpursue a balanced external accountgradually
realise greater convertibility in various types of renminbi
assets
Factor price liberalisation Steadily advance reform of interest
rate liberalisation Electricity, water
Inclusive growth Housing affordability and security Gini
coefficient targets? Hukou (household registration system)
reform
Environment Binding carbon emissions reduction targets
Renewables + nuclear
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Implementation outlook
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Inclusive growth Income distribution will begin to correct
itself through labour market forces Individual income tax
adjustment Monopoly industries Rollout of hukou reform will
streamline access to public services Health care to receive more
funding
Environment Continued consolidation of polluting industries
Renewables + nuclear--hydro to see largest capacity increase But
energy (and fossil fuel) demand will continue to soar
Economic rebalancing Pilot program: Some banks to set their own
interest rates Eventual full float of yuan?
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Whats missing
Rural land reformEstablishment of fair systems for farmers to
sell land
Bloated state-owned sectorCrowding out by SOEs, high degree of
regulatory and political risk for private sector players
EducationAcademic corruption, outdated curricula, poor
environment for basic research
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