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Perspective on China: Growth, only child, environment, the Chinese five-year plan

By 30th October 2015 Trader's Desk No Comments

The Chinese Communist Party (CCP) direction meets this week in camera to set the broad political and economic guidelines for the next five years, while the country is engaged in a laborious rebalance of its growth model.

These are the main questions at the heart of discussions on the five-year plan covering the period 2016-2020.

What growth target?


Yuan Growth
The second world economy is experiencing a significant slowdown in growth, which is expected to fall this year to the lowest in a quarter century. The regime had set a goal for 2015 of about 7%.
“Beijing should significantly degrade its ambitions for 2020 – the leaders could agree on a flexible annual target by 6.5%, with the possibility of revising down this figure, as long as the job market stays around current levels”, according to Nomura bank’s analysts.
President Xi Jinping recently assured that “a growth rate of around 7% would be sufficient to achieve the goal of doubling by 2020 China’s GDP compared to 2010”.
The new goal could however only be unveiled in March, after validation by the Chinese parliament.
The credibility of official statistics remains debated, and many experts predict a more pronounced economic slowdown.

What could be the “new normality”?

Beijing assumes “the new normality” of slower growth, which is the result of its efforts to rebalance its economic model in favour of domestic consumption and the service sector, while reorganizing the huge state sector.
These guidelines, endorsed the end of 2013, should be confirmed at the meeting.
The five-year plan should further increase the share of services in GDP, which already grew from 44% to over 51% between 2010 and 2015 and confirmed the goal of doubling household incomes between 2010 and 2020.

Towards made “by” China?

Chinese manufactured exports are struggling, because of a mixed international situation but also by increased competition. There is also high inflation on the cost of Chinese hand force.
In this context, Beijing openly calls for an upgrade of the Chinese industry to the electronic and new technologies.

What about financial reforms?

Liberalizing furthermore the financial sector reform is also highly expected, especially on the convertibility of the yuan, with the possibility of cancelling controls on capital movements in 2020. Finally, further opening of financial activities with foreign institutions and the private sector could be considered.

Cleaning up without coal?

China Pollution Tourism

Pollution of air is a sensitive subject for China’s opinion, and important decisions should be taken.
Another problem is about coal, highly polluting, which still represents about 70% of China’s energy mix, in the absence of other sources of energy in sufficient quantities, and despite a nuclear fleet in full extension.
China has also committed to a peak in emissions in 2030.

End of one-child policy?

Already eased two years ago, official experts have recently called to urgently allow all couples to have two children in order to slow down the aging population and the alarming gender imbalance.
Since late 2013, the Chinese can have two children if one parent is an only child.

UK and China recently engaged

Uk and China agreeing
President Xi visited the UK a few weeks ago and agreed up to £40 billion deals. These deals will create around 30.000 jobs in the country. UK and China commit to building a global comprehensive strategic partnership for the 21st Century. The two sides recognise the global significance and strategic importance of stronger UK-China relations in promoting global peace, stability and prosperity. Both sides reiterate that they are determined to support each other’s prosperity and development and to work together for the benefit of global peace, security and development.