China’s top central planning body, the National Development and Reform Commission, expects to release an initial draft of its 2016-2020 plan for the US$10 trillion economy in late October.
Five-year plans are high-level maps of the direction the Communist Party intends to steer China in the next half-decade.
They are eagerly awaited by China watchers as a declaration of the state’s intent, economic direction and growth targets.
The approval process for each plan is generally highly political and opaque, highlighting power struggles within the party.
The annual National People’s Congress is expected to rubber stamp it in March 2016, while each province and industry will unveil complementary plans in the following months.
China’s recent initiatives such as the Asian Infrastructure Investment Bank, the “One Belt, One Road” sea and land trade routes across Eurasia and the internationalization of the yuan signal the government’s enthusiasm for further cross-border trade, infrastructure projects and foreign exchange financing.
More global links along the lines of the Shanghai-Hong Kong Stock Connect are likely to be launched involving more exchanges and asset classes such as bonds and commodities.
Non-traditional financial services may be given a greater role to reduce the reliance on state-owned mega banks as their credit quality deteriorates.
Newly packaged financial intermediation services such as peer-to-peer (P2P) lending, crowd funding, internet financing, asset securitization, derivatives and corporate bonds are likely to be a regulatory focus and encouraged.
P2P lending, for example, surged 377 percent to US$43.6 billion in August compared with a year earlier.
Foreign and domestic firms that adapt to the new financial conditions in an increasingly market-based and internationally open environment should see new opportunities.
The views expressed in this article are those of Alex Gardner, an analyst at Bloomberg Intelligence.
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