What next five-year plan must prescribe for Chinese economy

July 23, 2015 10:03
Chinese President Xi Jinping has pledged to ease state control over the economy. Photo: Bloomberg

In the past few weeks Chinese leader Xi Jinping has been meeting with provincial Communist Party bosses ahead of the party's so-called Fifth Plenum in October.

One of the main topics in the talks is the nation's next five-year plan, which sets out the goals that the government wants to achieve by 2020.

Foremost among these is economic reform, particularly Xi's pledge to ease state control over the economy, according to Bloomberg News.

Discussions are likely to center on the role and structure of state-owned enterprises, oversight of energy prices, and what to do with the current 7 percent growth target.

“Here lies the credibility of the leadership,” said Zhang Wenkui, a senior researcher at the Development Research Center, a unit of the State Council, or China’s cabinet. The five-year plan “is supposed to make the Chinese Dream happen”.

Xi, who will mark three years as the party's general secretary this autumn, has championed a vision of becoming a “moderately well-off society” by 2020, with gross domestic product and per-capita income levels double those of 2010.

In order to achieve this, the government has been restructuring the economy to shift its reliance from exports and industrial production to consumption.

It has been promoting private sector competition and realigning credit allocation from big state firms to more productive sectors of the economy.

A draft of the 2016-2020 plan is complete and the government is seeking comments from local officials and experts, according to China Business News.

Xi has been at the center of the planning process, holding meetings with party bosses of at least 18 provinces in the past three months, the official Xinhua News Agency reported.

Bloomberg lists some of the major challenges facing the Communist leadership:

- Limiting population growth in some of China’s top-tier cities, such as Beijing.

- Encouraging rural migrants to focus on smaller locations.

- Deepening the nation’s social-security system.

- Reforming rural landholdings.

- Giving families of internal migrants access to public services including education and health.

According to Han Meng, a senior researcher at the Institute of Economics of the Chinese Academy of Social Sciences in Beijing, the country's GDP growth target could be brought down to a more sustainable level, say, 6.8 percent.

Another option is to abandon the annual growth target, a move that could allow policy makers to take more risks, said Levin Zhu, former head of China International Capital Corp.

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