China has released its proposed new five-year plan, which will be finalised and approved by the China National People’s Congress in March 2021. Professor of International Business Carl Fey has reviewed the key content of the proposed new plan, the fourteenth of its kind, and explains why the decisions made by the world’s second largest economy have effects for the rest of the world.
‘The upcoming five-year plan has global significance because China normally achieves the goals it sets out. In China, businesses and citizens usually try to do whatever they can to contribute to the goals set by the government, whereas people and businesses in many other countries often try to avoid what the government suggests,’ says Professor Fey.
Products and services for the rapidly growing middle class
According to Fey, while China’s five year plans are extensive and cover many topics, the most important focuses of the upcoming five-year plan are double-circulation and technological innovation. In addition, China will launch impressive environmental plans, improve intellectual property protection, and focus more on becoming more digital.
‘Double-circulation means that China does not only want to be the export-focused economy that it has historically been, but it aims at producing products for its own growing middle class, too. China also aims at developing services as a growing part of GDP,’ Fey explains.
‘The new approach is natural since China’s middle class is growing rapidly and will help the country maintain growth. However, focus on China’s own market is partially also a reaction to the realities of the world as many countries, such as the US, have become more protectionist.’
Focus on technological and environmental development
Due to the increasing cost of labour and China’s aim to become an innovator – instead of just being the world’s factory – the country will also pay increasing attention to technological innovation. The push for technological development started already in the country’s previous five-year plan but is an even more important focus in the upcoming five-year plan. This puts pressure to the development of intellectual property protection.
‘More and more Chinese firms are working hard to create innovations, and China is filling more patents each year than any other country in the word. So it is not only foreign firms but also Chinese firms that are pushing for improved intellectual property protection,’ Professor Fey says.
Finally, China also has impressive environmental plans as part of the 14th five-year plan. The country, which is currently the world’s largest emitter of carbon dioxide, has announced that it will try to peek these emissions by 2030 and achieve carbon neutrality by 2060.
‘Chinese citizens are tired of having poor air quality and other environmental problems. As a result, China has voluntarily and unilaterally agreed to aggressive environmental goals in the coming years, and these will be supported by the 14th five-year plan. Coal is still a key source of energy in China and decreasing this will be a key challenge, but large investments in alternative technologies, such as electric batteries, wind, and solar energy have already been made, and they will play increasingly important roles moving forward,’ Fey says.
Professor of International Business Carl Fey
Aalto University School of Business, Department of Management Studies
+358 50 4081070