By Markandeya Karthik

Let’s talk about planned economies and China’s “Five year plan”. 

Planned economies are essentially countries whose economic structure is pre-planned and centralized. This means that investment, production, and the allocation of resources all occur under specific government plans. Basically, economies which are planned are like a rated-PG movie. They need parental guidance. 

Two weeks ago, China officially announced its fourteenth “Five year plan”, revealing key details and components. The thirteenth five year plan, issued by Premier Li Keqiang in May 2015, was a nationally strategic one which aimed to develop the country’s manufacturing sector and move China away from being the global factory of cheap, low-tech commodities. 

A shame, because I’ve had some fond experiences with fake Supreme bags and tech trinkets in Shanghainese counterfeit markets. 

However, the thirteenth five year plan was heavily criticized, primarily by international powers like the UK and the USA, for being overtly aggressive and ambitious. Beijing was targeting key technology and sectors in other countries, which stirred discomfort and fuelled an anti-China sentiment in the US and other parts of the world too due to a fear that China’s economy was going to become a lean, mean, money machine. 

To avoid making the same mistake for the next five years in the fourteenth five year plan, Beijing has announced an approach which can be summed up in three key words. Self reliance, technology, and quality. 

In terms of self-reliance, China has announced that they will be speeding up their promotion of a new product development pattern. In this pattern, domestic and foreign markets will work in an almost symbiotic relationship, boosting and improving each other through innovation and development from China. The key difference here to previous years’ five year plans is the fact that the domestic market will remain in focus. In the last five year plan, China vowed to open up to world markets. That’s going to be Facebook, Twitter, and all the other techies take advantage of. 

In terms of technology - according to SCMP, Chinese policymakers have made it “clear that their top priority is upholding the central role of innovation in the country’s modernisation drive and implementing an innovation-driven development strategy”. What many suspect is behind this priority to uphold technological innovation is the US-China conflict. Volatile relationships between the two countries in the last few years has prompted a realization in China that technological dominance is key to gaining the upper hand on a geopolitical level. 

In terms of quality - China forecasts that through their five year plan, the country’s per capita GDP will reach the level of developed countries by 2035. Essentially, the country wants to bring its GDP per capita close to a country like Poland, Hungary or the Czech Republic’s to avoid what is known economically as the “middle income trap”. The middle income trap is an economic situation in which a country that attains a certain income gets stuck at that level. The World Bank defines as the 'middle-income range' countries with gross national product per capita that has remained between $1,000 to $12,000 at constant prices. Essentially, China is attempting to harness their 5 year plan in order to avoid the middle income trap, because it’s an economic transition period which is characterized by a drop in education and skills, as well as lower trade and purchasing power on an international level. 

Will their five year plan work? Time will tell. Over the past twenty years, China’s ascent to becoming an international economic powerhouse was built on establishing solid trade relationships with other countries, and so the sudden transition into self-reliance contrasts their previous actions and contradicts their current policies, such as the Belt and Road initiative, which is hinged on expanding China’s power into other nations by improving their domestic markets and industries. China’s technology sector, however, has kept pace with foreign trends - for instance, phone companies like OnePlus, Huawei, and XiaoMi are all based in China but have international userbases - and so the country’s aim to foster and maintain innovation is not a farfetched one.

This article was featured in the South China Morning Post - Young Post Op/Ed “Young Voices” section on December 3rd, 2020