We chronicled a deluge of 5-year plans just before the 2022 Two Sessions—5-year plans: 150-odd and counting… The list is still live; we are now up to 247. Please check our earlier post to see recent additions. We will keep building the list should more plans emerge.
We noted that geopolitical friction was putting the national interest in sharper focus last year. And the buzzwords ‘common prosperity’, ‘national security’ and ‘self-reliance’, though not new, were stealing the headlines.
Domestic challenges in 2023 now place geopolitical fence-mending in etill sharper focus as Beijing, swivels to shore up a plummeting economy—trade was down a whopping 10 percent in December y-o-y, and officially GDP for 2022 has come in at 3 percent–far from the target 5-5.5 percent. Beijing must tap domestic savings to fuel a post-COVID rebound; it cannot jump-start demand in advanced economies, still relied on for the lion's share of GDP.
In the words of some eminent PRC economists, COVID drove the creation of an ‘epidemic-fighting’ complex, returning the reform-era market system to top-down direction. This threatens the entire economy—markets, enterprises, banks and even the central bank—with being ‘zombified’. There is some pent-up frustration in these warnings. Veterans of the Zhu Rongji 朱镕基 era of market enthusiasm, these experts fret that a functioning market economy will be lost.
As the 5-year plans roll out, we will be alert to any eclipse of the ‘guidance role’ they gained through the reform era, and to signs of inflexible ‘planning’ or direction that has has taken advantage of the lockdowns.
As economic challenges grab global headlines, we survey policy initiatives gaining steam in the background and how they will play out in 2023.
FDI rescuing self-reliance
‘Self-reliance’ still holds sway in overall policy and industry 5-year plans. As 2023 loomed, global demand was capsizing and seemed unlikely to resurface soon. So focus shifted to shoring up domestic demand. However, apart from tax and credit breaks for the real estate market and the zero-COVID rollback to tap consumer savings, more tangible support for consumers has not emerged.
The long-term message is about raising productivity via specific FDI (hence making nice again with source countries); indigenous innovation is on notice to raise incomes and so boost aggregate demand. Demand for higher quality goods is to form a virtuous circle, generating domestic innovation to meet it... so the narrative goes.
Fear of missing the high-end tech bus began rising after Washington invoked sanctions on the US semiconductor industry. Ironically, FDI remains indispensable for self-reliance, to say nothing of moving up global value chains. With exporters likely facing tougher times, more support will be given in 2023. Logistics will be overhauled to link PRC markets, as Beijing shies away from tackling local protectionism.
the law goes global
Beijing's law focus is on maintaining stability as it rolls out legislative 5-year plans. Apart from the ever greater politicisation of the law, there have been little diversion from the steady drumbeat of promoting PRC 'rules-based governance'.
The Party's aspiration to expand PRC global influence is ever more obvious, and the tempo is stepping up. Rather than simply adding isolated provisions to laws, a foreign-related 'rule-of-law' framework is emerging. Meanwhile laws relating to 'foreign interests' have are being regeared to appease litigious foreign actors, promote the extraterritorial application of PRC law, and clarify the scope of immunity of foreign state property. Most of this, however, remains rudimentary for now.
The PRC Constitution is back on the legislative agenda—the point being to ensure a stable political and social environment for investors. New laws, like the Legislative and Military Reservists laws, reiterate the importance of adhering to the Constitution.
unifying the tech market
COVID's impact on the critical sectors of public health and food security showed up their shoddy management. Beijing stepped up digitising them in the hope that management would improve. 2022 saw new 5-year plans to digitise key sectors, including health, pharmaceutical sales, and ag and rural. These moves form part of the vision for fully digitising state services, with data centralising all data.
Commercialising research and bridging scitech to the real economy are in the current plans. A 5-year plan for tech factor markets issued September 2022 envisages a well run national market for tech transfer. This realises a unified tech and data market in step with the State Council's April 2022 call to create a ‘unified national market’, in all sectors. For tech the market will cover data security, ownership, cross-border transfer, trade, open sharing and safety certification criteria.
energy and emissions: national power market on track
The need for a ‘modern energy system’, in line with climate pledges, was confirmed in 2021. The 14th 5-year plans break some new ground. An overall plan, to mature in 2035, emerged in April 2022. A significant move before 2025 is to set up a national power market, a departure from state-set pricing, towards a more dynamic landscape. The consequences of the shift are fundamental. Discussions on key details are ongoing, with draft regulations now circulating. Meanwhile, the buildout of large clean energy bases is accelerating, the point being to solve future low-carbon issues: energy storage and grid flexibility, as well as global competitiveness and influence.
Targets addressing climate change, not least reaching peak carbon before 2030 and neutrality before 2060, have gone live, overseen by a dedicated leading group under former vice-premier Han Zheng 韩正. Since 2021 agencies have issued a constant stream of announcements and actions, currently numbering 75.
For environment air and water quality, biodiversity, and sustainable development remain in focus.
education budgets falling
14th 5-year plans for education have since late 2021 sounded the theme of education that fulfils people's needs, reiterated in General Secretary Xi’s 20th Party Congress report (October 2022). Needing to address inequality, Beijing will turn to inclusive special ed to meet the growing demand from marginalised students, paying attention to those with other special needs, not just the physically disabled.
Secondary schooling is a huge issue at the county level, where retaining students and teachers is hostage to the lure of cities, threatening rural revitalisation. Shoring up funding is equally important. Localities are urged to turn out their pockets to fund ed. Their pockets have however been squeezed dry, not least by rigid obligations under the unlamented zero-COVID policy. Contingent on recovery in the coming years, meeting targets looks to be touch and go.
digital health
COVID controls spelt windfall gains for TCM (traditional Chinese medicine). In 2022, four 5-year plans were geared towards promoting it. Better grassroots services, skills training and an industry empowered by tech innovation goes the rubric on how it will progress. In addition, the Greater Bay Area will be a development magnet, prepping TCM to go global. Yet, for all its heavy promotion through the pandemic, TCM has met with lukewarm domestic interest.
As the PRC population inexorably ages, digitising the national health system is on the books, in line with the 'Healthy China 2030 initiative'. Despite the withdrawal of digital codes for COVID control, an electronic health code for every citizen will likely be the norm by 2025. Claimed free of underlying mobility surveillance, the promise is of efficient cross-regional public health services, including medical insurance settlement. Yet, given that information-rich data generates profits, setting up benefit-sharing among healthcare providers will be the main challenge.
Plans point to an overall improvement in the healthcare system. Yet trust in the competence of the system remain at a premium. Distrusting lower-level medical care, patients flood top hospitals for even basic services. In the wake of the ill-prepared reopening, confidence in the system will likely dwindle as medical staff, particularly at the grassroots, struggle to service their public.
TCM get IP protection
IP with teeth is still awaited. A '5-year plan to protect and leverage IP' underscores taking both domestic and global settings into account. Twelve months since the plan appeared, navigation and open licensing systems for patents have been developed. IP protection in areas like TCM is being improved as well. Convergence with international norms is furthered by accessions to, for instance, to the Hague Agreement and the Marrakesh Treaty on copyright for the visually impaired. In addition, overseas centres to guide PRC firms in responding to IP disputes may help PRC enterprises go global.
ag still needs cash
The ag and rural narrative (built on 5-year plans released up to H1 2022) is mostly unchanged. Having however survived a year rocked by extreme weather, Beijing cites production costs and 'broken global food chains' as it promotes domestic ag capacity, backed by improved farmland, modern machinery and seed R&D. Rural revitalisation, an overegged mantra facing the head-on challenge of economic slowdown, can, nevertheless, expect further stimulus via infrastructure projects, with industrial clusters aspiring to maximise rural non-farm income and consumption.
Several central designs for sustainable development were released on top of the umbrella ag 5-year plan, laying out a blueprint for greenhouse gas control and agrochemical reduction. The plans remain on the policy agenda, but likely to be eclipsed by food security demands. Green agriculture, notably low-carbon development, lacks concrete targets to move forward.
tourism on the rebound
Laid low by COVID-19, culture and tourism have been eclipsed, with jobs knocked sideways under lockdowns. Yet hopes for boosting cultural industries are rising. Plans for the industry urge that it reflect 'traditional' PRC culture. This may limit global, let alone local, take-up. Nevertheless, expectations are high on the returns to had from its global promotion.
Online bookings have blossomed under COVID. Domestic operations are urged to carry ideological content via ‘red tourism’. With controls rapidly disappearing, overseas travel is expected to explode later in 2023, doing its bit to boost consumption.