ACBC View: China’s 14th Five-Year Plan: Key Takeaways

The 2021 session of China’s Two Sessions of the National People’s Congress has recently concluded and the outline of the 14th Five-Year Plan (FYP) has been approved.

The FYP charts the development of China’s political and economic development – as well as its global trade relations – well beyond the next five years. By incorporating Long-Term Goals to 2035, the FYP sets out an ambitious strategy to achieve the long-term goal of becoming an economic and technological superpower by 2049 – one hundred years after the founding of the People’s Republic.

Given the size and increasing global influence of China’s economy, this FYP has significant implications for businesses in China, and around the world.

Six takeaways for Australian companies

1. Growth will be lower but will focus on quality. The FYP does not set annual targets for GDP growth, but the 2035 Goals assume an annual growth rate of around 4.5 per cent. If successful, China would be a $30 trillion economy by 2030 – approximately on par with the United States.  Structural reforms will target service sector developments and improved efficiency and productivity.
   
   The focus on the quality of the growth rather than speed of growth highlights the complementarity that exists between Australia’s exports of high-level services to China and emerging domestic opportunities. Further sustainable growth signals further business opportunities for Australia in aligned and targeted sectors, as well as continued growth in the pool of Chinese capital available for offshore investments.  

2. Innovation and technology will be a national strategic pillar. China’s goal is to achieve self-sufficiency in key technologies, such as semi-conductors and artificial technology, by 2035. It aims to boost its technology capacity, targeting key industries such as AI, quantum information, integrated circuits, and biotech.
   
   For Australian companies, security, privacy, and geopolitical risks abound, but if Australian business and industry are to compete in the markets of the future, the need to be engaged with these developments remains paramount.

3. Opening up to continue. The FYP calls for further market opening of China’s services sector by easing and removing market entry restrictions and improving industry regulations. In doing so, Beijing seeks to attract quality investment to drive the evolution of the domestic service sector, advancing the transition towards a consumption-driven economy. Priority support is expected to be provided to those foreign investors with expertise in leading technologies, advanced manufacturing, and world-class services.
   
   China is fast becoming a hub for accelerated innovation, not just for Chinese companies but also for Australian firms wanting to leverage their research and manufacturing ecosystem to efficiently commercialise concepts and designs into products. Financial firms and funds also have emerging opportunities to invest into the domestic bond and stock markets. Businesses should proceed with both eyes open, as the FYP also emphasises that self-reliance is the eventual objective to protect the country from a “tangled and complex international situation.”

4. Greater focus on the environment and carbon neutrality. Progress towards peak carbon emissions by 2030 and carbon neutrality by 2060 will be achieved through a 3 per cent reduction in energy consumption per unit of GDP growth.
   
   Decarbonisation policies will have the potential to accelerate clean energy progress globally This presents risks to Australian coal exports but demand for related equipment, services and investment are likely to continue growing swiftly and present  opportunities for Australian suppliers of renewable energy solutions.

5. Consumption and services will become the cornerstone of China’s economy. China’s consumer market has experienced a sustained post-pandemic recovery. The recovery was initially driven by manufacturing and production, investment, and exports. As the economy continues to recover, consumption and service industries will play a more pivotal role.
   
   The opportunity for Australian exporters of high-quality premium products and services is well known. The focus on consumption and the provision of services to a rising middle class is well known, but extra due diligence and resources will be required to execute strategies effectively. This is a particular opportunity for Australian suppliers of health and well-being products and for aged care service providers. Destination tourism will become more competitive and there will be strong opportunities for sports engagement and sports science services. 

6. Urbanisation and mega-city regions to support economic growth. China’s development goals heavily involve the urbanisation of its population to city-centres and mega city regions. The target has increased from 60% (achieved in 2020) to 65% of the population. Mega economic regions such as the Greater Bay Area will be granted authority to pursue new pilot programs for development and innovation.
   
   Urbanisation will drive construction, services, jobs growth, and higher levels of household disposable income. Rising household incomes will fuel demand for premium priced consumer goods and services. Exporters should remain alert to opportunities emerging from shifts in consumer preferences. Mega regions will provide further opportunities for Australian companies to explore They also promise opportunities in other parts of China where competition is less fierce.

Over the coming months, ACBC will explore how these developments might impact Australian business engagement with China and provide practical advice to members on how to remain engaged and active with a growing China. Stay tuned for our upcoming Industry Summits and Digital Bootcamps.

Additional Reading

1. APCO Worldwide’s excellent business guide to the 14^th Five-Year Plan
2. An English translation of the 14^th Five-Year Plan (with links to the original Chinese language version)
3. A ready reference infographic to the 14^th Five-Year Plan and 2035 Targets published by the Global Times