China’s five-year plans
As China’s global influence increases and its rivalry with the US intensifies, analysts will be watching this year’s “two sessions” of the National People’s Congress and Chinese People’s Political Consultative Conference for clues as to Beijing’s economic and social priorities, strategies and worries. These areas are likely to be the focus for China’s 14th five-year plan, the blueprint that sets the direction of the world’s second-largest economy.
Who drafts the plans?
As the 13th five-year plan draws to a close, the government is expected to set the direction of the next plan this autumn before it is tabled for the national legislature’s approval next March.
During the planned economy era, the State Planning Commission was key to drafting the five-year plans. The agency went through several transformations as China moved towards a market economy in the 1980s to become the National Development and Reform Commission (NDRC) in 2003.
With the power to approve investment projects, the NDRC expanded into a super-ministry and became the target of lobbying by local governments and big corporates. Its portfolio has been reduced since President Xi Jinping took office in 2013.
Beijing looks to the Soviet Union’s model of economic planning to prepare its 1st five-year plan. The plan is sent back to the drawing board several times before official approval in mid-1955 as 150 Russian-backed defence, mechanical, electrical, chemical and energy projects are given the go-ahead to build China’s industrial capacity, virtually from scratch.
China’s 2nd five-year plan is never officially approved.
The 3rd plan focuses on food, clothing and housing after a two-year gap to allow the economy to recover. The defence and heavy industries are diversified into inland provinces. Again, the plan is never officially approved.
A draft 4th five-year plan is issued with unrealistic targets during the political upheavals of the Cultural Revolution. Premier Zhou Enlai, later with the help of Deng Xiaoping, takes charge of economic policies and revises the plan with practical goals following the mysterious air crash that kills Mao Zedong’s designated successor, Marshal Lin Biao.
1974 Beijing drafts a 10-year plan consisting of two five-year parts which is not issued until December, 1977. It is the last five-year plan of the command economy era.
The second part of the 10-year plan is overhauled in 1980 and approved by the national legislature in December 1982. The new five-year plan, China’s sixth, includes social development programmes as rural and economic reforms are rolled out.
The 7th five-year plan is the first to be approved and delivered on time. Transitioning from a planned economy to a market-based one proves difficult and, with the economy overheating, people become angry about inflation and growing corruption.
Reforms nearly stall after the Tiananmen crackdown and the situation continues at the start of the 8th five-year plan. The GDP growth target was initially set at 6% with state leaders emphasising that planned and market economies should coexist. Beijing later recommits to its reform and opening-up programme, boosting its average annual GDP growth to 12%.
The promotion of market competition and reforms are embraced as the private sector flourishes. Reliance on export and foreign investment - driven growth exposes the Chinese economy to external shocks but Beijing manages a “soft landing” after mastering macroeconomic policy tools.
In the aftermath of the Asian Financial Crisis, the 10th plan focuses on balancing reforms, development and stability. Beijing starts to address the side effects of breakneck growth and turns its attention to environmental protection and equitable distribution of wealth and economic growth.
Beijing changes the Chinese title of the five-year “plan” to “programme” in an attempt to distance itself from being seen as a planned economy. The 11th plan focuses on sustainable development, growth model, innovation, and balancing urban-rural developments. The goal to double GDP per capita from the level set in 2000 is achieved in 2009.
Tax reforms, an innovation-driven economy and promoting China as a soft power are among the highlights of the 12th five-year plan. Domestic consumption is identified as a key economic driver and regional development is emphasised.
In the 13th five-year plan, described by some analysts as the “most environmentally-focused”, Beijing pledges to allow the market the decisive role in resource allocation while the government “plays a more effective role”. Innovation is a cornerstone of its development strategy with ambitions to move manufacturing up the value chain.
Graphic and content editor Darren Long.
Editing by Matt Ho.
Additional research by Han Huang.
Illustrations by Adolfo Arranz. Web development by Han Huang and Dennis Wong
Sources: National Bureau of Statistics of China; International Monetary Fund; China Youth Daily; Chinese People's Political Consultative Conference; National Development and Reform Commission; “State and Market in Contemporary China: Towards the 13th Five-Year Plan”, Scott Kennedy, CSIS, March 2016; “The 13th Five-Year Plan”, Staff Research Report, US-China Economic and Security Review Commission, February 14, 2017 Past Five-Year Plans