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The Communist Party of China (CPC) concluded its fifth plenum, approving the contours of its 14th five-year plan, operative from 2021 to 2025, last week. It is remarkable that the world’s second-largest economy continues to believe in centralized planning. This, even as the origin of the idea, the Soviet planning approach, died along with the splintering of the USSR. India also closed down its Planning Commission six years ago. Yet, the Chinese continue to build and implement five-year plans.

Their planning process is bottom-up, with inputs from economists, scholars, professionals and provincial governments. Even netizens sent a million suggestions this past summer. How many of those crowd-sourced suggestions will make it to the final plan is not known. That detail is less important than adherence to the process, which, at least for the sake of appearances, seems to be quite inclusive. It gives a sense of participation to everybody. China’s 14th five-year plan will be formally adopted in the National People’s Congress, its equivalent of parliament, in March. And thenceforth, the central and provincial governments will work in tandem to ensure that the plan’s goals are achieved. These goals, as articulated now and approved by the CPC, go way well beyond 2025, all the way to 2035. For instance, there is a mention of establishing a “socialist culture" in China by 2035. How are these goals different from the 13th plan?

Firstly, there is no explicit mention of a numerical growth target. The Chinese moved below the psychological growth rate of 7% some years ago, and even 6% seems fine now. In this pandemic year, it would be enough to achieve any rate so long as it is positive. By one estimate, the Chinese economy will be twice as big as that of the US in purchasing power parity terms by 2030.

The second difference is a subtle one in terminology. The 14th plan’s big goal is to make China a “moderately developed" economy by 2035. This is different from “moderately prosperous", as was mentioned in the earlier plan. Is there a difference? The word “developed" implies a per-capita income of $30,000, at par with some West European countries. Developed also implies an economy more sustainable and green than merely prosperous, which only focuses on the dollar value of gross domestic product.

A third important difference in the 14th plan is an inward focus. President Xi Jinping recently introduced the term “dual circulation" to describe an economy less dependent on exports. That means China will depend less on the deep pockets of Western consumers, and will pull itself up by the bootstraps of its own well-off consumers. As such, the rebalancing from exports to domestic consumption had begun some time back. (“China’s rebalancing act", 29 March 2016, Mint). China already has a 400-million strong home consumer base with per-capita incomes similar to European countries, and represents a market size of at least $6 trillion. India’s growth aspirations cannot afford to ignore export opportunities to this market. While Xi’s dual circulation economy emphasizes the domestic circularity of consumption, production and distribution, it does not exclude participation in global value chains, nor does it seek to snap off an import-export connection. China is still committed to importing nearly $10 trillion of goods and services from the rest of the world in the coming years. Its inward focus, which began in the 13th plan, got accelerated and crystallized as “dual circulation" due to trade frictions with the US and its allies.

The fourth difference is the new plan’s emphasis on technology and innovation. Intellectual property rights have led to much friction with the US. China apprehends that key technologies such as semiconductors will be denied to it. Hence the focus on indigenous development. It already enjoys leadership in 5G telecom, artificial intelligence and electric vehicles. For the 14th plan, it would mean enhanced expenditure on research and development.

The plan also mentions economic reforms and greater market-orientation. Clearly, the Chinese would like to see their currency becoming more internationalized, and their debt market becoming more subject to market discipline. In the last decade, Chinese growth was fuelled by an indiscriminate increase in credit. That will need to be curbed. There is also a subtle hint of privatizing land ownership, which, if implemented, would have a significant bearing on China’s rural economy. There is a call to “Go West", which would imply greater development of the country’s north and western regions, basically meaning Tibet and Xinjiang.

Though distinct, each plan maintains some continuity with the previous one. How do we know whether the goals of China’s five-year plans have been achieved? It has a one-party system with no opposition to hold the government accountable. Hence, its legitimacy is derived completely from social and economic outcomes. These outcomes are first articulated as goals in its five-year plans. Publicly available data, which can now be triangulated from multiple sources, can be used to verify the government’s claims.

Poverty, by the usual $2-a-day definition, has fallen from above 40% to less than 1% in the past 30 years. Some 300 million people were able to find industrial jobs and escape rural poverty. That does not mean everything has gone according to plan. China’s huge rise in inequality speaks of a failure to achieve the “harmonious society" spoken of since Hu Jintao. Chinese efforts at greening its economy haven’t fared very well either.

Ajit Ranade is an economist and a senior fellow at The Takshashila Institution, an independent centre for research and education in public policy.

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