The China-U.S. trade spat that began in April 2018 and COVID-19 pandemic of 2020 were unexpected challenges during China’s 13th Five-Year Plan period (2016-20), interrupting growth of such purely economic indices as speed and incomes. Despite that, targets of the 13th Five-Year Plan have basically been accomplished, mainly in the aspects of economic efficiency, environment and precision poverty relief.
The biggest challenge and uncertainty for the 14th Five-Year Plan period (2021-25) is the continuously changing external environment. COVID-19 has caused some changes to take place earlier, rather than 15 to 20 years from now, and those changes will continue accelerating in the next few years — meaning the global tide of anti-globalization very likely will evolve during the 14th Five-Year Plan period, and may surge continuously. Due to the impacts of COVID-19, domestic contradictions have vexed major developed nations, resulting in declining demand for globalization.
COVID-19 has also made many countries shift their attention to guaranteeing the integrity of the domestic system of production, as well as supply chains. With more countries worrying that globalization may influence their own socioeconomic security, there will inevitably be a wave of redeployment of industry chains in the post-pandemic era, which will bring shock waves to China.
During the 14th Five-Year Plan period, the political, economic and social order globally will likely undergo dramatic changes, and the impacts on the Chinese economy should not be underestimated. One important consideration behind the government’s proposal to accelerate formulating a new pattern of “dual circulation” was based on this.
Of course, globalization remains a general trend in the present-day world. In step with progress in science and technology, telecommunications technologies and improvements in transport systems, world economic activities will further integrate. Residents are better equipped and more willing to travel to other countries and broaden their horizons, and are more inclined to try the products of other countries. Driven by technology advancement, globalization is a trend of human progress that deserves to be sustained.
But the trend of globalization has run into some small countercurrents, so the 14th Five-Year Plan period may herald a new type of globalization. Specifically, globalization during the period may be what is called for, promoted and sustained by emerging economies such as China, rather than preserved and pushed solely by U.S.-led developed nations.
In short, the push for globalization may come from China, with its huge potential for imports. Using the Import Expo as a platform, China is telling the world it is a big market, so come to China to sell your products, because it is willing to buy. As foreign merchants come and sell in China, they naturally will be aware that China is a production base, and inclined to produce some products domestically. The trend of the new type of globalization is this: China attracts foreign investors and other productive factors with its mammoth consumer market, and then it sustains and promotes the new type of globalization with an open market.
China needs to adjust its “flight attitude” during the 14th Five-Year Plan period.
The 14th Five-Year Plan period is a very special one on China’s road to its second centennial goal. The overall strategic goal for the period should be to fine tune the posture of Chinese economic development. If the Chinese economy were an airplane, it would need to trim its “flight attitude” and lay a fine foundation for accomplishing the second centennial goal.
The 14th Five-Year Plan period will also witness constant turbulence in the international situation, and the so-called centennial changes will likely speed up. All countries will adjust their post-COVID-19 policies. China, too, needs to adjust, rather than simply pursue high growth. The government has already decided key directions and dimensions of such adjustments to build a new development pattern featuring “dual circulation.”
China needs to reduce its previously high reliance on external circulation, on international markets and on international technologies, and shift to a new development mode featuring relatively balanced external and internal circulation.
An adjusted flight attitude calls for China to lay solid groundwork for domestic development, building a relatively stable, secure and controllable production regime and mastering core technologies, while at the same time unleashing Chinese market demand, so that it no longer has to depend too much on foreign markets.
The key points in China’s development over the next five years are found in the following three aspects:
First, conform to the great trend of the redeployment of economic geography, promote a new type of urbanization and raise people’s income levels. The three viable ways to boost incomes are: 1) improving labor productivity by means of cross-region population mobility; 2) new type of urbanization; 3) gradually resolving the issue of relative poverty via the rural revitalization project following the successful conclusion of precision poverty relief.
Second, cultivate certain domestic markets, such as those for old-age support, general health and broadly defined education and training, while maneuvering some breakthroughs in core technologies and ensuring the completeness of industry chains.
Third, lay a solid foundation for ecological and environmental wellness, as well as energy conservation and emissions reduction, so that the country can peak its carbon releases by 2030. So there have to be breakthroughs in certain key technologies, for instance, many gas-burning automobiles should gradually be transformed into electric ones. Power generation, therefore, should also turn from depending mainly on coal-burning to renewable or nuclear energy. Finally resolving some key issues related to people’s livelihoods, such as those concerning education and old-age support.
Hard work needed to tackle underconsumption
The pandemic has taught China a number of lessons:
One is the need for society-wide risk-prevention mechanisms. In the coming period, the country should constantly improve those mechanisms. For example, various important strategic materials, such as tents, medical equipment and medical supplies, should be stored in different areas. COVID-19 has alerted China to the necessity of such a system.
Second is the need to further reform the medical care system and further upgrade its public-welfare functions. The medical system’s excessive emphasis on economic benefits is problematic. The government should increase investment in public health.
Third is the need of the national economy’s capacity for self-circulation. Many international exchanges and trade activities have come to a stop since the coronavirus outbreak; therefore, China needs the ability for self-sufficiency, and the pandemic has highlighted autonomy of the country’s supply chains. The Chinese economy has recovered relatively well. If there are no major unexpected disruptions, it may see growth of more than 7 percent.
Growth in 2021 will be based on the relatively low base of 2020, and many activities need to be restored, many plans need to be fulfilled. The pandemic situation still has uncertainties, but China has already developed some scientific countermeasures. For instance, it is gradually pushing ahead with vaccinations.
Consumption of goods has generally recovered, but underconsumption exists in some areas. The pandemic has resulted mainly in underconsumption in tourism, which calls for considerable during the 14th Five-Year Plan period. At the end of the day, tackling underconsumption rests on increases in residents’ income expectations, and the most important fact is that they won’t spend confidently without those expectations.
There have to be down-to-earth methods to improve people’s income expectations, the most important of which is to speed up urbanization and reform in household registration, so that transient workers can afford to buy government-subsidized housing and put their assigned land back in rural hometowns into market circulation.
China has done a relatively better job in handling pos-pandemic wealth gaps, because it started resuming work and production as soon as the pandemic situation stabilized. Local governments dispatched means to the countryside to transport transient workers back to their places of work, which was far better than in some Western countries.
The Chinese government has enacted a series of down-to-earth measures to truly increase incomes of the middle- and low-income groups, which is a key move. It is boosting people’s income expectations by means of urbanization, household registration reforms and preferential policies, such as subsidized affordable housing, long-term rental homes and medical guarantees.
Consumption is the ultimate foundation, which calls for boosting income expectations. Depending entirely on providing consumer loans to stimulate consumption may easily cause trouble when such loans become excessive.
There still is a gap between China and developed nations when it comes to consumption’s proportion of GDP, and an important task for the country during the 14th Five-Year Plan period is to raise that proportion.
Meanwhile, the pattern of consumption accounting for more than 70 percent in developed nations is not necessarily reasonable, and may be too high. For example, these countries have experienced underinvestment and entered another stage in which they had to resort to correctional measures.
It is generally more reasonable to have consumption accounting for 60 to 70 percent. The proportion is around 50 percent in China, but the State Bureau of Statistics figure is around 40 percent, which is very likely a low estimate. Chinese statistical data about household consumption are based on door-to-door surveys. Many people hesitate to participate in such surveys, and even when they do, they tend to underreport income and spending.
