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China’s 12th Five Year Plan

What is the exact nature of China’s Five Year Plan?

China’s Five Year Plans (FYPs) are blueprints: they provide overall objectives and goals related to social and economic growth and industrial planning in key sectors and regions. Although most consider the FYP to be a single document, the FYP represents a complex web of Chinese policy-making, containing previously-implemented regional and long-term development plans and hundreds of targeted policy initiatives, all of which undergo constant review and revision over the course of the five-year cycle. Though this process might seem rather chaotic, the FYP process is increasingly standardized, open and subject to significant oversight within the wider bureaucracy.

What are the major characteristics of the 12th Five Year Plan (12th FYP)?

A focus of the 12th FYP is on the quality, rather than the rate, of growth, as well as ensuring more Chinese citizens benefit from that growth.

What are the key themes of the 12th FYP?

Three key themes in the 12th FYP are economic restructuring, social equality, and environmental protection.

How will the economic restructuring  be carried out?

While economic rebalancing has been a government priority for many years, the sharp decrease in Chinese exports during the financial crisis, leading to the layoff of millions of factory workers, underscored the importance for Chinese decision-makers of moving to a more balanced growth structure. As China looks inward for growth, key objectives for the 12th FYP will be to shift the relative importance of GDP components – from the current reliance on fixed asset investment (FAI) and exports – to a greater emphasis on consumption. Economic rebalancing has been a consistent priority for the government for several important reasons. These include the perceived unsustainability of maintaining an exceptionally high growth rate, large global trade and foreign exchange imbalances that have led to tensions between China and its major trading partners, the desire to spread the fruits of decades of growth to a wider proportion of the population and the inefficient use of resources that accompanies high levels of FAI by the government at all levels. The 12th FYP will include policies that support a lower GDP growth rate, consumption-driven growth, upgraded industries, strengthened “national champions” and more backing for the government’s indigenous innovation drive.

What are the maj issues regarding social equality?

President Hu Jintao and Premier Wen Jiabao have made development of a “harmonious society” a key priority for their administration, and the 12th FYP will continue that focus under the rubric of “inclusive growth,” which means spreading the benefits of economic growth to a wider community. Interestingly, the 12th FYP Guidelines has changed the previous creed of “Strong State, Wealthy People” (国强民富 or guoqiang minfu) into “Wealthy People, Strong State” (民富国强 or minfu quoqiang), implying that “Wealthy People” is now the greater priority. Not surprisingly, Hu and Wen are seeking to use the 12th FYP to bed down their legacy as the first leadership team in the post-reform era with a strong focus on equality issues, including Urban/rural divide, Regional development and  Income disparity.

How will the environment be effected protected?

China faces severe environmental degradation for many reasons, including rapid industrialization, a reliance on coal as an energy source, a relatively large and energy-intensive manufacturing industry and lax environmental protection and enforcement. The 12th FYP is expected to focus on reducing pollution, increasing energy efficiency and ensuring a stable, reliable and clean energy supply. China’s environmental goals will likely have a far-reaching effect as they will impact and shape a range of other industrial policies in a multitude of sectors.

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