What will be in China’s next Five Year Plan?

The sidewalks of Beijing are conspicuously well-swept. That’s because yesterday kicked off the annual meeting of China’s National People’s Congress. This showcase time of year, laden with pomp and circumstance, is also when the government most wants to avoid any hint of unrest, or even uncleanliness, from hitting the streets. When the NPC session concludes a week from Monday, China’s leaders will formally announce the details of the country’s 12th Five Year Plan (2011-2015). Many aspects of the plan have been previewed in the media.

Beijing’s extraordinary long-term vision is to raise per capita GDP in China from $4,000 to $10,000 by 2020, and the next five years is obviously critical. Chinese Central Banker Zhou Xiaochuan said at a recent G-20 meeting in Paris that the country has 10 years to transition from an economy heavily reliant on manufacturing and exports to one driven by domestic innovation, higher-end manufacturing, services, and consumption. Think about that for a moment. If achieved, that would mean overturning — once again — fundamental aspects of Chinese education and society.

Of course, the challenges are many. As Dan Harris of the excellent China Law Blog notes in a long post summarizing what to expect from the next Five Year Plan, China’s leaders have themselves identified ten potential obstacles to future prosperity:

1. Resource constraints: energy and raw materials.
2. Mismatch in investment and imbalance in consumption.
3. Income disparity.
4. Weakness in capacity for domestic innovation.
5. Production structure is not rational: too much heavy industry, not enough service.
6. Agriculture foundation is thin and weak.
7. Urban/rural development is not coordinated.
8. Employment system is imbalanced.
9. Social contradictions are progressively more apparent.
10. Obstacles to scientific development continue to exist and are difficult to remove.

If you’re interested in how the Chinese government aims to overcome those hurdles, the entire post is well worth reading. Among the most ambitious objectives of the 12th Five Year Plan, as Harris summarizes them:

— Expand domestic consumption while maintaining stable economic development.

— Promote energy saving and environmental protection.

Currently, for every 1% increase in GDP, China’s energy use increases by 1% or more. If this rate continues, China will need to increase its energy consumption by 2.5 times to achieve its 2020 economic goal.… One major way to reduce the amount of energy required for the Chinese economy is to implement energy saving practices throughout the economy. A second way to reduce is to shift from hydrocarbon based energy to alternative energy sources. The new plan advocates an all out program in this area.

— Create an innovation driven society by encouraging education and training of the workforce.

China will need to become a domestic innovator in all areas of current modern technology, with an emphasis on practical industrial applications. Where China is not capable of domestic innovation, China will continue to import technology from advanced economies. However, China will seek to actively domesticate that technology through a program of “assimilate and re-invent.”

How well China fares in meeting such targets will be something to watch for the next five years, and beyond.