A proposal for the formulation of the 11th Five-Year Plan for
National Economy and Social Development (2006-2010) was examined
and approved at the Fifth Plenary Session of the 16th Central
Committee of the Communist Party of China (CPC), which concluded in
Beijing on October 11.
The central government's Five-year Plan typically lists
medium-term policies concerning the country's economic and social
development. A communiqué released by the CPC introduced many new
concepts, ideas and goals for building a well-rounded and affluent
society. Many economists and scholars have highly praised the plan.
They also offered more suggestions, according to a Shanghai
Securities Journal report on October 13.
Per capita GDP considered
The communiqué released after the plenary meeting read: "In
addition to optimizing industrial structure, improving company
profits and lowering resource consumption, China sets to double its
per capita gross domestic product (GDP) in 2010, from that in 2000,
and to reduce energy consumption per GDP by 20 percent than in
2005.
The goal of doubling per capita GDP is an important indicator
for the whole plan, said Zhang Zhuoyuan, an economics researcher
with the Chinese Academy of Social Sciences (CASS). To achieve that
goal, an annual growth rate of about 7.4 percent has to be
guaranteed during the five-year plan period, and it is feasible
since the country has enjoyed an average 8.8 percent annual growth
over the last five years.
This is the first time that energy consumption per GDP point has
been introduced into a five-year plan. Such an indicator, Zhang
said, can maintain certain economic growth rate and save energy as
well. To ensure sustainable growth, many efforts are needed in
lowering energy consumption, optimizing industrial structure and
promoting technical upgrade and independent innovation.
Zhang pointed out that China's elastic coefficient of energy
consumption, which indicates how much energy is consumed to achieve
per GDP point, has exceeded 1 point every year since 2001.
Financial reform to be accelerated
Accelerating financial system reform was stressed again in this
communiqué. Professor He Fan, assistant director of the Institute
of World Economics and Politics under the CASS, forecasts that
financial reform will be deepened and accelerated on the basis of
previous achievements.
"During the 11th Five-Year Plan period, the market penetration
of interest rates will be further boosted; reform of the Renminbi
exchange rate system will continue; more monetary policies will be
implemented; market tools like interest rates rather than credit
adjustments, will be used for economic macro-control; controls on
capital accounts will be loosened; and the foreign exchange market
developed further," He predicted.
He said: "The banking sector will be further opened to
investors, from home or abroad. Private enterprises will also be
given access to it. As for financial institutions in rural areas
like rural credit cooperatives, some new reform measures will
gradually be adopted to provide better financial support to the
development of rural areas."
With the creation of split shares (tradable and non-tradable
shares), He said that the country's capitals market will shake off
stagnation, while some systemic problems will gradually be
eliminated. In his opinion, the futures market, which helps hedge
risks due to price fluctuations, will be developed quickly and more
financial derivatives will emerge over the next five years. China
can accordingly gain more rights in determining the price of
related products in international market.
Industry watchers eagerly anticipate when the government will
break new ground by mixing financial operations. He believed that
it is likely for mixed operation to be started during the coming
five-year period despite its being treated with caution now.
"People first" concept also needed in tax
reform
The communiqué also highlighted that "reform is a strong driving
force for economic and social development. Currently, reform has
entered its crucial period, so we must be firm when accelerating
reform and making breakthroughs in system reform." It also asks to
"boost fiscal and tax reform."
Dr. Jia Kang, director of the Research Institute for Fiscal
Science under the Ministry of
Finance, pointed out that supplementary measures are also
needed if scheduled goals are to be achieved. All the measures need
to be decided upon now, he emphasized. The construction of the
public finance system, some parts of which have been implemented,
needs to be more extensive. Meanwhile, the reform on fiscal and tax
system should fulfill scientific development requirements if it is
to serve the purposes of building a harmonious society and
implement the "people first" concept.
Jia also urged the government to push forward the practice that
county-level governments manage fiscal expenditures of township
governments, while provincial governments supervise that of county
governments. Fiscal system reform, as an important part of
administrative reform, should also be expedited.
Jia suggested that tax reform over the next five years should be
carried out step by step. The adjustment of some taxes, technically
easy to make, should be deliberated more thoroughly since it
concerns the interests of the masses.
Independent innovation stressed
The communiqué points out that "China should have a group of
enterprises which have their own independent intellectual property,
internationally-known brands or strong international competitive
strength," and "make independent innovation the main stimulus for
industrial structure development and a transformation of economic
growth patterns."
"After high-speed growth in the country in the past over 20
years, China has entered its medium-phase of industrialization,"
said Huang Qunhui, director of Business Management Research Office
under the CASS.
"How to become an industrial power," Huang said, "is fundamental
to industrialization, the main restriction being a company's
inability to innovate."
?
Huang said that a nation's competitive strength, in some sense, can
be embodied in the competitive strength of its enterprises.
Enterprise's competitive strength is decided by cost and
differential advantages. To achieve differential advantage,
technical innovation and management upgrade are needed. In an
increasingly competitive environment, China should not rely on low
cost production. Instead, it should quicken its pace towards
full-fledged industrialization. Developing a longstanding and
sustainable competitive strength takes a long time, and the
eleventh five-year plan is only a start.
Although Chinese products are prevalent in almost every market
around the world, few manufacturers own any intellectual property,
high-value-added products or possess strong competitive strength.
Thus, enterprise should emphasize more on technical innovation.
China's state-owned enterprises (SOEs), in particular, should lead
the way.
The ruling Communist Party of China will continue to solicit
opinions from citizens from all walks before it submits the
proposal at the fourth session of the 10th National People's
Congress for discussion and approval next March.
(China.org.cn by Tang Fuchun October 20, 2005)