China’s system for the past 75 years has been built around a series of party meetings organised in a five-year cycle, and this week saw the 4th Plenum, or annual meeting, of the Central Committee of the 20th Party Congress. This meeting is where the most powerful people in the country come together to discuss and decide on the key political, economic and social issues facing the country, and propose the plan for 2026-2030 (the 15th Five-Year Plan or FYP) which will be ratified next March. Setting the targets and direction for the economy through FYPs perhaps made sense during the 1930s in the Soviet Union and in the 1950s in China, but there is the question of how relevant such a centralised approach is to economic development in the 21st century, given the incredible volatility and the speed and unpredictability of change. On the other hand, it is also definitely true that it’s good to have an overall plan of where we want to go.
So we have the plan. We don’t have all the details yet, but from what we have seen based upon the announcements that have been made, the plan is pushing for the same things that have been talked about over the last couple of years and beyond—“high-quality” economic development, self-reliance on all key technologies and materials, a shift from basic to advanced manufacturing, and also improved welfare conditions for the people of China. The China system over the last decade and more has been stressing more and more strongly national security and central party control over economic development. But the overall sense of the economy is that it is not in good shape, apart from certain areas that involve massive government subsidies and investment, including batteries, AI, infrastructure and non-fossil fuel energy production.
As we have pointed out before, and many others too, there is something of a contradiction between security and control and economic growth. The contradiction is that to create grassroots enthusiasm would to some extent involve a devolution and dispersal of control to households, private enterprises and foreign investors. The announcement at the end of the 4th Plenum indicated both an awareness of the fundamental economic problems—“We must vigorously boost consumption”—and a parallel determination to not waiver on the fundamental line: “Uphold the Party’s overall leadership and … adhere to Marxism-Leninism … and fully implement Xi Jinping Thought.”
One interesting aspect is that the system has proposed a target for per capita GDP to grow to the level of a moderately developed country by 2035. That would mean that China’s per capita GDP would grow from around $14,000 today to around $35,000 in a decade which would probably require approximately 10% GDP growth year on year on year. But even according to the officially announced figures, China’s GDP is actually growing at around, but probably less than, 5% per year. So how would it get to the level of growth required to hit that target? What a good question.
Anyway, this is based on just a preliminary look at the information. More in due course. But meanwhile, blue skies and a warm weekend for all!