China's New Course

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China’s 13th Five-Year Plan sees keeping annual growth above 6.5 per cent as essential for achieving the key goal of doubling income per head by 2020 compared with 2010.

This should be achievable, despite the current economic slowdown. Supply-side is not a constraint as potential growth is unlikely to slow meaningfully: instead, demand deficiency and deflation are the main problems.

While the 12th Five-Year Plan prioritised rebalancing the economy, the new plan adds context – stressing the importance of switching from investment-driven growth to a more balanced model that emphasises unleashing the potential of service consumption.

Further opening up the economy – especially services such as finance, insurance, securities and care – will add growth momentum, while the move towards full renminbi convertibility under the capital account will continue.

A key goal for the next five years is to rebalance the economy away from investment in heavy industry towards services

Green development is key and Beijing has set a tough poverty alleviation target and pledged to improve public services. Upgrading China’s industrial base and integrating the internet with traditional industries are also priorities.

We expect urbanisation to increase from 55 per cent to 60 per cent by 2020 with the ‘hukou’ household registration system settling 100 million rural migrant workers in cities permanently.

China’s actual growth rate consistently exceeded the set target during the past five-year plan period. In presenting the new plan, president Xi Jinping stressed that, despite the challenges facing China, growth of around 7 per cent is still possible in coming years.

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