PLANNING AHEAD: WHAT TO EXPECT FROM CHINA
In March 2021, China’s top leaders convened for the most important annual event under the National People’s Congress – referred to as the Two Sessions. China’s 14th Five-Year Plan (2021-2025) was formally ratified during the sessions. Several other long-term objectives were also discussed and approved. This presentation outlines the key decisions and potential implications.
GROWTH IS GOOD – BUT ONLY THE RIGHT KIND
GDP
Objective
No GDP targets are set for the next five years. Emphasis on job creation and stability with targets for food and energy security appearing for the first time in a Five-Year Plan.
Implications
Beijing wants to reduce expectations to the quantitative growth performance by focusing on quality. Local governments may object.
Dual Circulation
Objective
Reducing economic dependency on rest of world is top priority. Expanding domestic demand by
boosting consumption will be main driver. But trade ties to other countries remain important.
Implications
The move is aimed at the United States. China’s economy still relies too much on exports to U.S.
market, and import of American-made key components such as semiconductors.
TECH TITANS ASPIRATIONS
Digital Economy
Objective
China’s digital economy will contribute 10% to overall GDP by 2025 – up from 8% today.
Implications
Building the infrastructure to sustain a huge digital leap means embracing emerging technologies such as AI, IoT, blockchain etc.
Innovation and R&D
Objective
Tech innovation will be made a national strategic imperative. Public R&D budget will increase by 7% every year.
Implications
China is already allocating significant resources to home-made innovation. Several Danish companies have set up R&D facilities to benefit from this. More can be expected to follow.
Advanced Manufacturing
Objective
Domestic manufacturers will use emerging technologies to complete transformation from Made in China to Made by China.
Implications
Globally integrated supply chains are a precondition for China’s manufacturing sector to become world class. This means opportunities for Danish suppliers.
LEAN, CLEAN AND GREEN!
Reduce Energy Consumption
Objective
Non-fossil fuel’s share of energy consumption will increase to 20%. Intensity from carbon emissions will be reduced.
Implications
China’s already vast scale of wind and solar power will be further expanded. Pace of developing new coal-fired electricity sources will be reduced but not eliminated.
Clean Air and Water
Objective
Air quality in big cities will be classified as good 87.5% of time. 85% of surface water will be
classified as Grade III or higher.
Implications
Air quality targets require a large increase in number of electric vehicles for public transportation and logistics.
OPEN FOR BUSINESS WITH CHINESE CHARACTERISTICS
Market Access and Competition
Objective
Make state-owned companies more productive. Open key sectors to private companies. Reduce
negative lists for foreign investors.
Implications
Paradoxically, China’s ambition to become more self-dependent requires a more liberalized
economy and close interaction with foreign business. Beijing needs to find the right balance between nationalism and globalism.
Hong Kong
Objective
Hong Kong’s legislative structure will be changed to ensure that only Beijing loyalists can govern the city.
Implications
China’s government will go far to relaunch Hong Kong as an international finance and business hub. When the political tensions have cooled off, foreign companies may once again consider Hong Kong a viable location alternative to the Mainland.
SUMMARY
- There are no significant surprises in China’s next Masterplan. Most decisions have already been considered inside and outside China.
- However, the calls to promote energy and climate solutions confirm President Xi & Co.’s commitment to China’s green transition. This focus will undoubtedly open up for more Danish business opportunities.
- Politically, China seems destined to continue the rivalry with the United States. The encouragement to invest in China’s digital development is aimed at creating alliances with the rest of the world – including Europe. But the selfreliance ambitions will surely deter many international companies from committing 100% to a future in China.