BOFIT Viikkokatsaus / BOFIT Weekly 2021/12
The National People’s Congress convened this March to approve China’s 14th five-year plan (2021–2025), as well as set out policy directions through 2035. Although many of the latest plan’s policy themes are familiar, there has been a distinct change in emphasis to reflect increased competition among the great powers.
Over the next five years, China’s policy priority is to bolster development of its high-technology sector and increase the nation’s self-sufficiency. Spending on research & development will rise by 7 % a year. There will also be an effort to focus support on select strategic fields that typically relate also to national security. Fields mentioned include quantum information science, artificial intelligence, microchips and biomedical science. China’s long-discussed, but slowly proceeded structural reforms towards an economy driven by services and consumption have been moved to the back burner in the latest five-year plan. Over the short-run, China will return its focus to industry with the goal of keeping industrial output growth at least on par with growth of the service sector.
Unlike previous five-year plans, China did not set a five-year GDP growth target, even if the country is unwilling to give up on the GDP growth target per se. Instead of abandoning targets, the five-year plan calls for setting GDP growth targets each year. President Xi Jinping stated at late last autumn that a doubling of Chinese GDP between 2020 and 2035 was “entirely possible.” In practice, this statement is seen as anchoring annual growth targets for the next 15 years.
President Xi announced last autumn that China will seek to be carbon neutral by 2060 and the target was expected materialize in the new five-year plan as more ambitious pollution limitation efforts than seen before. However, it appears that few major changes from previous trends have been included. Like in previous plan, the new plan calls only for a gradual reduction in the ratios of emissions to GDP and energy consumption to GDP from current levels. The plan also sets a target for increasing the area of forested land.
The issue of raising the retirement age is also discussed in the plan. While raising the retirement age has been under consideration for many years, it has been hard to push forward with this change. China indisputably needs to raise its retirement age as the current pension age is just 50 or 55 for women and 60 for men. Moreover, the average Chinese life expectancy has risen to 77 years, the population structure is aging rapidly and the working-age population (15–64 year-olds) is dwindling. Many Chinese choose to continue working after reaching retirement age, of course, as pensions are generally quite meagre. In addition, retired grandmothers often assume a large share of responsibility in caring for grandchildren so the parents can go to work. For this reason, the plan sees also improvements in day care and preschool programmes. Raising the pension age would also slow the growth of government pension spending.