Key Party meeting to review proposals for medium- and long-term prospects

The Communist Party of China will set the tone for the country's socioeconomic development in the next five years and beyond at this week's key Party meeting, amid economic slowdown as a result of the ongoing COVID-19 pandemic and growing tensions with the United States.

The Fifth Plenary Session of the 19th CPC Central Committee, which opens on Monday, will review and adopt proposals for the 14th Five-Year Plan (2021-25) for Economic and Social Development and targets for 2035 — a top-level policy blueprint for China's mid- and long-term development.

President Xi Jinping, who is also general secretary of the CPC Central Committee, has paid a great deal of attention to the drafting work. In the past months, he made two instructions on formulating the blueprint, and held a series of meetings and symposiums to obtain opinions and suggestions from economists, social experts, entrepreneurs, scientists, professionals outside the Party and grassroots representatives in order to make the plan more relevant to China's reality.

Using the mid- and long-term plan to guide social and economic development is an important way for the Party to govern the country, Xi said when addressing a symposium attended by experts in social and economic fields in August.

Practice has proved that the five-year plans can fully leverage the decisive role of the market in allocating resources, and can also help the government play a better role in economic development, he added.

Since 1953, China has made and implemented 13 five-year plans for economic and social development, except for a period of economic adjustment between 1963 and 1965. Such plans lay out detailed targets and guidelines covering economic, social, educational and environmental matters, and provide directions for economic reforms and industrial restructuring.

Guided by them, China's overall national strength has been enhanced, people's livelihoods have been improved, and the country has created the miracle of long-term rapid economic growth while maintaining long-term social stability, Xi said.

The formulation of the 14th Five-Year Plan comes at a critical point at which China's goals of completing the building of a moderately prosperous society in all respects by 2021 and becoming a modern socialist country by 2049 converge with challenges in the economy, diplomacy and industrial development amid the COVID-19 pandemic.

In response to the challenges on the way ahead, Xi has stressed accelerating the building of the "dual circulation" development pattern on many occasions in order to increase the country's economic resilience.

The new development pattern highlights the need to allow the domestic and international markets to complement each other with the domestic market as the mainstay. Specifically, "domestic circulation" will be the main driver that will likely unleash the potential of domestic demand and stabilize supply chains, while "external circulation" will continue to improve connectivity with international markets via opening-up and cooperation.

Xi described the new development pattern as a "strategic choice" for China to rebuild its strength in international cooperation and competition in line with the changes in its development stage and environment.

While calling for measures to expand domestic demand, Xi also stressed that China will further push forward higher-level opening-up to build an open economy.

Experts said that the new development pattern is expected to be enshrined in the 14th Five-Year Plan to increase the country's economic resilience in response to heightened geopolitical concerns and mounting uncertainty in the global economy.

Chen Fengying, a senior researcher of the world economy at the China Institutes of Contemporary International Relations, said that the next five years are critical for China to shape the new development pattern in dealing with the grave and complex domestic and international landscape.

The new five-year plan needs to take into account the country's economic upgrading and high-quality growth during the post-pandemic period, Chen said.

Manu Bhaskaran, CEO of Centennial Asia Advisors, said that the "dual circulation" strategy is not a sign that China is turning inward.

Chinese leaders understand well that engagement with the outside world is vital, so the question the new five-year plan has to answer is how to achieve a good balance between building resilience and maintaining an open economy, Bhaskaran said in an opinion article published on the Edge Markets website.

Despite already being an integral part of China's development strategy, promoting innovation-driven development to move the country up the global value chain has become increasingly urgent in recent years.

While addressing a meeting attended by Chinese scientists in September, Xi underlined the strategic importance of scientific and technological innovation in the country's economy, and called for concrete efforts to solve problems that curb the development of technological innovation.

Xi's remarks came as the prospect of continued US efforts to undermine China's industrial and technological champions, such as Huawei and ByteDance, became a serious headwind amid the country's efforts to upgrade its industrial capabilities and accelerate the development of domestic high-tech industries.

Resources for research

In the light of decoupling pressures and technology restrictions, China may allocate more resources to fundamental research, frontier research and technology bottleneck areas-including chips and semiconductors, software, precision machinery, fine chemicals and advanced robotics-better protect intellectual property rights, and offer more market incentives to researchers, according to Wang Tao, chief China economist at UBS Investment Bank.

Analysts said the 14th Five-Year Plan is also likely to stress the need to rectify the imbalance between the urban and rural economies, improve regional disparities and create several mega-clusters of cities in order to build a stronger and more resilient Chinese economy.

It is clear that China is at a critical turning point, Bhaskaran said, and its impending changes in economic strategy will have substantial effects on the global economy and on geopolitical developments for some time to come.