A fool’s guide to China’s 14th 5-Year Plan

Key Points

  • The 14th five-year plan (FYP), covering the years 2021 to 2025, was officially endorsed by the National People’s Congress (NPC) on 11 March 2021
  • China’s 14th Five-Year Plan marks a shift away from the quantitative growth-focus to improve its quality and sustainability

In the Chinese market, regulations heavily impact the future of every company. At the cornerstones of each set of policies stands the 5-year plans. In this article, we break down and summarize China’s most recently announced 14th 5-year plan.

1. Economic Development

Category20202025 target
GDP growth rate2.3%
Labour productivity growth2.5%> GDP
Urbanization rate60.6% (2019)65%

For the first time ever, no explicit GDP growth target was stated, only that it should be kept “within a reasonable interval”. This couples with the government’s low 2021 expectations that seem to be driven by the instability and uncertainty caused by the pandemic.

However, there is possible additional drivers as this flexible target means that China will be able to prioritize other economic goals such as improving the sustainability and quality of said growth, without failing to meet benchmarks.      

2. Innovation

Category20202025 target
Growth in R&D spending –> 7%
Innovation patents per 10,000 people6.312
Digital Economy share of GDP7.8%10%

In its 14th 5-year plan, China continues to aggressively expand its progress in research and technology. The term is repeated 180 times throughout the document, including technological innovation, financial innovation, policy innovation and institutional innovation, touching on all sectors of the economy and public services.

As discussed in some of our previous articles, the government has a clear vision to restructure the economy to focus on more sustainable sectors (EV, battery production, etc.) and the goals set out here follow in those steps. Hence, we believe that companies in these sectors will be largest beneficiaries of government subsidies. In similar lockstep, although there will be a large emphasis on technology innovation, “softer” tech sectors such as Edtech and e-commerce could continue to see the slash each has already experienced.

3. People’s Wellbeing

Category20202025 target
Growth in disposable income2.1%
Urban (survey) unemployment rate5.2%< 5.5%
Average years of education of working-age population10.811.3
Number of licensed physicians per thousand2.93.2
Basic pension insurance (participation rate)91%95%
Nurseries for infants under 3-year-old per thousand people1.84.5
Average life expectancy77.3

In this section, nothing of surprise or of note, as the government continue to target improving quality of life and education for the general populous. This is highlighted by goals to continue to improve access to healthcare, education among workforce, and the average wealth of each household.

4. Green ecology

Reduction in energy consumption per unit of GDP % – 13.5%

Reduction of CO2 emissions per unit – 18%

Category20202025 target
Share of days with good air quality in cities at prefecture level and above87%87.5%
Share of surface water at or better than class III83.4%85%
Forest coverage rate23.2% (2019)24.1%

China continues to aim to become carbon neutral by 2060. Should GDP grow at 5%, carbon emissions are estimated to rise by 1% per year, a pace too high to stabilise emissions between 2020 and 2030 for a 1.5°C scenario. This section of the plan attempts to front-load actions to realise China’s climate change and Paris Agreement commitments. In addition to continuing R&D for cleaner and more efficient power generation, the government looks to use policy to target fossil fuels. This would include:

  • Imposing harsher restrictions on greenhouse gases
  • Eliminating fossil fuel subsidies
  • Limiting the number of emissions permits
  • Imposing a carbon tax

No doubt, firms hugely dependent on fossil fuels will suffer, while renewable energy companies will continue to receive government support.

5. Security/Safety

Will China's self-sufficiency drive raise the risk of a US conflict? |  South China Morning Post

Comprehensive grain production capacity: > 650m tons

Comprehensive energy production capacity: > 4.6b tons of coal equivalent

Interestingly, in contrast to the previous 13th 5-Year Plan, there has been an additional Security/Safety chapters added to the 14th plan. This is not particularly surprising, as trade slows whether due to COVID-19 or increasingly souring international relations, these may force China to become more self sufficient than ever. This section of the plan covers food, energy, and finance security as sectors with extra emphasis. Key projects listed include expanding food storage facilities as well as developing power emergency response systems.

Disclaimer: Our content is intended to be used solely for informational and educational purposes, and not as investment advice. Always do your research and consider your personal circumstances before making investment decisions. ChineseAlpha is not liable for any losses that may arise from relying on information provided.

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