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Sieren's China: The next five year plan

Frank SierenOctober 26, 2015

China's new five year plan is being discussed this week in Beijing as the country seeks to grow less but more sustainably. The new direction is also important for Germany's economy, says DW's Frank Sieren

https://p.dw.com/p/1Gub6
A man reads Chinese newspapers
Image: picture-alliance/dpa/Kyodo

This week, the international business and political community will be looking carefully at what is going on in China's capital. From October 26 to 29, the country's most important leaders are meeting for the fifth plenary session of the 18th Communist Party Central Committee (CPCC). In a closed session over the four days, the central committee's 205 members will discuss how the country should further develop.

This year's session is particularly important because the five-year plan that will set the framework for Chinese policy between 2016 and 2020 is being debated, at a time when China is undergoing significant reforms and the global economy is very unstable. The dilemma is that while it's important to have a plan in uncertain times, it is very difficult to make plans in such times.

Slower growth in future

In China, double-digit growth is a thing of the past. This year the country will achieve just seven percent growth, its lowest rate in 25 years. However, seven percent growth today corresponds to the same economic potential that 14 percent growth did five years ago.

Frank Sieren
DW columnist Frank SierenImage: picture-alliance/dpa/M. Tirl

What's also clear is that a new development phase is beginning for China's economy, with new political focal points that are not concentrating simply on more market economy. The turbulence on the Chinese stock exchanges in recent months has shown that the government cannot just leave the market to its own devices. Last week, the government spurred the economy again, cutting interest rates for the sixth time this year - by 0.25 percentage points to 4.35 percent. With interest rates of over 4 percent, there is still plenty of room for maneuver, which is not the case in Japan and the West.

Xi Jinping's first five-year plan

It's all down to President Xi Jinping and whether he will find the right balance in his first five-year plan and be able to create a sustainable economy in China. Other watchwords of his "New normality" theory are "high quality", "efficiency" and "equality".

The goal for economic growth has already been leaked - an average 6.5 percent per year. This slower growth will pave the path for structural change such as the further opening of the Chinese market. The internationalization of the currency will also be pursued. Yuan trading has developed so positively over the past few years that it could become a reserve currency in the near future. On top of this, the government wants to concentrate on renewable energies, protecting the environment and developing the infrastructure.

End of poverty

The aim is that the Chinese population will benefit from sustainable development. Will the government stick to its plan to double per capita income by 2020 and abolish poverty? According to official figures, there are still 70 million poor in China and last year, there were 12 million more. By comparison, fifteen years ago, there were 600 million.

The program will be tweaked again in December by the Central Economic Work Conference, before finally being enacted at the National People's Congress in March. It has rarely been the case that anything has been changed fundamentally at the Central Committee meeting let alone afterwards. Nonetheless, experts across the world will be intrigued by the results of the next few days. The German business community will be taking a particularly close look at what Beijing will decide to place the emphasis upon: Even with 6.5 percent growth, China will account for a third of global growth alone. The country is one of the driving forces of the global economy.

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