China’s top decision-making body, the Politburo of the Communist Party of China Central Committee, presided over the Fifth Plenum of the 19th CPC Central Committee that was held in Beijing’s Jingxi Hotel between October 26 and 29.
President Xi Jinping, in his capacity as General Secretary of the CPC Central Committee, delivered what has been billed as a major speech at the Fifth Plenum, which went on to review and adopt the CPC Central Committee’s proposals for the formulation of China’s 14th “Five-Year Plan (2021-2025) for National Economic and Social Development,” as well as the “Long-Range Objectives Through the Year 2035.”
** As has been widely reported, the plenum stressed that China should aim to achieve sustained and healthy economic development with a focus on “higher quality growth” over the next 15 years. But the focus on “quality growth” does not mean there was no discussion of growth targets, even if unofficial, with the plenum looking to maintain a still rather optimistic average annual GDP growth rate over the next 15 years of between 4.5% and 5.0%.
** More specifically, President Xi is said to have called for an average annual net increase of 7 trillion yuan (roughly $1.0 trillion) in GDP over the next 15 years, with the goal of hitting an aggregate income level of 200 trillion yuan by 2035, roughly double the current level. The plenum furthermore boasted that China will become the world’s largest economy within the next 10 years, expecting to cross the threshold of “high-income countries” by 2022 as classified by the World Bank. Incidentally, the WB currently defines high-income countries as those with a per capital gross national income of greater than $12,535, a threshold that may perhaps seem a tad modest to most traders.
** As to economic strategy, the buzzword du jour from the plenum was “Dual Circulation” — which essentially means a greater focus on internally generated growth. Stated more formally, the plenum stressed that in order to achieve a balance between development and economic security, China will speed up the building of a modern economic system and accelerate the establishment of a new development pattern featuring “dual circulation,” which takes the domestic market as a mainstay and allows the domestic and foreign markets to boost one another.
** The plenum also devoted considerable time to high tech goals, noting that China must build up its own supply chain with high-quality technology products over the next 15 years, and especially over the next 5 years. Technological innovation is expected to drive the domestic manufacturing sector and push it up the global value chain, while “strategically ensuring” domestic supply chains.
** And to illustrate the centrality of China’s technology ambitions, sources note that 12 of the 27 major economic and social indicators set for the 14th Five-Year Plan are related to “innovation-driven development,” including the overarching aim of raising the share of research and development spending as a percentage of GDP from 2.5% in 2020 to 3.0% by 2025. Officials expect that China will hit half of its “Made in China 2025” goals by 2023, despite, or perhaps hastened by, its open technology war with the United States.
** Finally, on financial reform, the plenum stressed that China would shake its reliance from the US dollar only through further enhancement of the internationalization of the Renminbi. Authorities will be urged to further ease restriction on the cross-border usage of the RMB of the next five years, with the goal of making the RMB a freely floating currency by 2025.