2 min read.Updated: 02 Nov 2020, 07:12 AM ISTLivemint
Beijing’s five-year plan outlines a big push for a hi-tech economy to go with an inward turn for value generation. India must grab all opportunities that arise and invest in the long haul
In February, electric carmaker Tesla’s chief Elon Musk forecast that China’s economy would eventually be two-three times America’s. He also issued a clarion call for innovation to act as a hedge against its rise. Whizzy products and services in hot new spheres of technology, as it happens, is exactly what Beijing also wants acting as the propulsive force of its economic growth over the next half-decade. This was laid down last week by a plenary session of the Chinese Communist Party’s top leaders that okayed its 14th Five-Year Plan for development over 2021-25, complete with goals outlined till 2035. China, accordingly, aims to transform its economy by boosting domestic demand and reducing reliance on exports, while it seeks to ascend the value chain of tech sophistication and attain self-sufficiency in intellectual property for the same. To make this happen, it plans to re-gear its mechanisms for resource allocation in line with a strategy of “dual circulation", which would push internal cycles of production and consumption and ease off on global engagement. We must watch how it plays out.
Missing from the Plan’s outline were specific growth targets. However, as the Chinese economy grew by an estimated 5% in the third quarter of 2020, even as most others reeled under covid-19, those will likely be set quite aggressively. Having expanded its output from $2.3 trillion in 2005 to $14.3 trillion last year, China hopes to become a “moderately" developed country by 2035, which would suggest a per capita income of over $30,000, thrice its current level. At this rate, China could topple America as the world’s top economy within a decade. Beijing’s inward shift, which was first initiated in the wake of de-globalization after the Great Recession of 2009 and lent urgency by its trade run-ins with the US, could succeed on the back of its middle class, placed at 400 million now. The US has tried to choke its access to Western knowhow and tech inputs such as semiconductor chips, which are used in mobile phones, artificial intelligence, next-generation telecom, self-driven vehicles and much else. Though China’s chip industry is just a fledgling, few doubt that it can reverse engineer what it needs, maybe even improve upon it. In some areas, such as 5G telecom equipment and big lithium batteries, it is already seen to have stolen ahead of the West. What analysts remain sceptical of, though, is its ability to invent stuff the world craves.
Given their commercial ties and entwined interests, China and the West are unlikely to decouple beyond a point, but the shifts underway will throw up opportunities that India must grab. Appropriate reforms to attract global value chains are just one aspect of what we must do. As China’s emergence pushes up wage bills and other costs that blunt its international edge, we could move into export markets it gets priced out of. But even as we engage the world to become its next factory, we must make a thrust to turn India globally competitive in businesses of the future. For a long-term advantage in novel fields, we must invest in broadening our base of education, keep our markets open, and encourage research. The state could play the role of an enabler. If we are to achieve the dream of an inventive economy, we must make the most of our democratic ideals, restrain statist impulses that could stifle diversity of thought, and foster a truly bustling market for ideas, per se. It’s on this wondrous resource that eventual success might yet turn.