The Eleventh Five-Year Plan:Turning Crisis into Opportunity and Forging Ahead

From: English Edition of Qiushi Journal Updated: 2011-09-20 15:16
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   China’s Eleventh Five-Year Plan for National Economic and Social Development will soon be coming to an end. For China, the past five years have been both inspirational and extraordinary. This has been a period in which we have turned crisis into opportunity and forged ahead despite turbulence in the global financial market. It has also been a time in which we have stood strong and gone on to achieve great things despite the onset of earthquakes and other natural disasters.

   Preliminary estimates indicate that China’s GDP grew at an average rate of more than 10% per year over the past five years. During this time, China’s economic output and export volume have climbed towards the top of the world rankings, while its GDP per capita has increased by a significant margin. Living standards have improved considerably, and the various developmental goals stipulated in the Eleventh Five-Year Plan have been fully attained. These things have sealed the place of the Eleventh Five-Year Plan as a glorious chapter in the great rejuvenation of the Chinese nation.

   In summary of the successes achieved in the Eleventh Five-Year Plan period, we believe that the following aspects should be highlighted and given continued emphasis in the future.  

   I. Efforts to boost domestic demand were successful in maintaining the steady and rapid growth of China’s economy

   The scheme to stimulate economic growth by boosting domestic demand was a crucial step that China took to avert a major economic slowdown in the wake of the global financial crisis. It was also a fundamental factor that allowed China to protect itself against external impacts and maintain steady and rapid economic growth throughout the course of the Eleventh Five-Year Plan period. In response to calls for rapid and stern action following the outbreak of the crisis, an economic stimulus package was put together rapidly and introduced before the end of 2008, which allowed us to seize the initiative in the fight to overcome the impact of the crisis. Prior to the outbreak of the crisis, China’s exports had maintained an average annual growth rate of more than 20% for seven consecutive years, accounting for as many as 2-3 percentage points in China’s overall economic growth every year. However, with the major slump that occurred in 2009, exports began to make a negative contribution to economic growth, accounting for an approximate decrease of 2-3 percentage points. Therefore, we had to turn to domestic demand in order to fill this gap. Considering the limited space for growth in consumer spending, the task of maintaining the stability of total demand, and thereby the stability of the economy, fell on the shoulders of investment. Emergency government spending was primarily directed towards the development of infrastructure, ecological environments and public services. These have long been weak links in our economic and social development, and the government has a duty to invest in these sectors. The onset of the financial crisis and the need to boost domestic demand provided us with an opportunity to address these areas of weakness. Wherein, boosting these areas of weakness not only adheres to the requirements of the Scientific Outlook on Development, but also represents an essential move that must be taken if we are to achieve our goal of industrial restructuring. Therefore, this was a policy that allowed us to turn crisis into opportunity. It is noteworthy that special focus was given to the development of high-speed railways during the effort to boost domestic demand, the construction of which is currently progressing at an extremely rapid pace. In the mid-1990s, China took advantage of the slump in external demand that occurred during the Asian Financial Crisis to boost its domestic demand, giving rise to a major surge in the construction of highways in China. Likewise, the development of the world’s most advanced high-speed railway network can now be regarded as a symbolic achievement of the country’s renewed efforts to boost domestic demand.

   A high-speed train prepares for departure at a railway station in Chengdu, the capital of Sichuan Province (January 2, 2010). China steadily implemented a general strategy for regional development during the Eleventh Five-Year Plan period. As a result, regions have come to rely more on their own resources for economic growth and increased coordination between the development of different regions has been achieved. In turn, this has provided a strong boost to China’s economy. The Chengdu Chongqing railway was the first railway built after the founding of the PRC. The journey between Chengdu and Chongqing, which took nearly 14 hours when the railway first opened in 1953, can now be done in just two hours on a CRH (China Railways High-Speed) train. / Photo by Xinhua

   II. Encouragement of independent innovation promoted the upgrading of the industrial structure

   China has increased its investment in research and development on a constant basis throughout the Eleventh Five-Year Plan period. This has led to the emergence of scientific research results in large numbers, which have played an increasingly prominent role in enhancing the technological level of China’s industries. In 2009, the State Council formulated revitalization plans for ten major industries in order to channel investment, promote the development of strategic new industries and accelerate the upgrading of traditional industries. The plans defined clear goals and policies for the development of the IT, technical equipment, steel and petrochemical industries. By expanding the application of advanced technologies and encouraging mergers and restructuring in the corporate sector, we have successfully increased the technological standard and the level of industrial concentration in these ten major industries. This has served to boost our international competitiveness. Currently, electromechanical products account for over 70% of China’s total export volume. Also, the share that our textile and other light industrial products enjoy in the global market has increased following the development of products with intellectual property rights and proprietary brands through independent innovation. The Outline of the National Program for Medium and Long-Term Scientific and Technological Development as well as more than 80 supplementary policies formulated by the central government have effectively stimulated R&D investment in the corporate sector and encouraged scientific and technical personnel to engage in innovation. Enterprises have now become the main source of innovation in China, with corporate investment in R&D representing almost 60% of China’s total investment in research and development. In particular, a number of success stories in which technical innovation has resulted in industrial upgrading and corporate development have emerged, which have boosted our confidence in China’s prospects of becoming an innovative country. For instance, we have obtained intellectual property rights for the manufacturing technologies used in the production of high-speed railway facilities. This was done by importing and assimilating technologies from overseas and then systematically integrating them to create new innovations. In addition to becoming one of the world’s most advanced manufacturers of communications equipment, China’s capacity to manufacture power equipment, metallurgical equipment, chemical industrial equipment and large ships independently has also increased at a rapid pace. The proportion that products with independent intellectual property rights and proprietary brands account for in China’s total exports has also increased on a constant basis. Both the quantity and the quality of China’s patent applications have risen considerably. In 2008, the Shenzhen-based Huawei Company applied for over 1,600 international patents, more than any other company in the world. In addition, research institutes and universities have actively engaged in numerous forms of cooperation with enterprises, thereby accelerating the pace at which scientific and technological advances are adapted for application in projects and industries. In summary, the Eleventh Five-Year Plan period has been a period in which our efforts to promote independent innovation have begun to deliver results.

   III. Emphasis on improving the people’s wellbeing led to positive results in the development of social programs

   Relatively slow progress in the reform of social systems has led to an over-reliance on government investment in social programs and prevented the entry of investment from the private sector owing to stringent entry criteria and “invisible walls.” Over a period of time, this has caused the development of social programs to seriously lag behind the pace of economic development. In 2006, the Sixth Plenary Session of the Sixteenth Party Central Committee made the decision to establish a socialist harmonious society. It also set forth the strategic goal of reforming the system of social management and promoting the development of social programs. During the Eleventh Five-Year Plan period, outlines for the development and reform of medical care and education were formulated, while documents concerning the improvement of the social safety net were also issued. These progressive efforts to streamline education, medical care and social security systems ushered in a wave of unprecedented prosperity in social programs. In response to the outbreak of the financial crisis, China invested heavily in the development of social programs as a part of the central government’s economic stimulus package, and continued to increase the proportion of budgetary expenditure devoted to social programs. Investment guidelines were reformed in order to allow large amounts of capital from the private sector to enter social programs. This was effective in reversing the long-term trend of slow growth in investment, and helped to address the supply shortages in public goods and public services. Investment in rural areas, which have long lagged behind in the development of social programs, was increased by a considerable margin, allowing rural areas to truly enjoy the benefits of public finance. A proportion of the funds allocated to boost domestic demand have been used to build welfare housing. Such projects have aimed to provide adequate housing for residents living in rundown urban zones, forest areas, grazing lands and regions where land has subsided due to the mining of coal. By allowing the people in these areas to benefit from the achievements of China’s reform and development, these housing initiatives have been met with a high level of public support.

   IV. The policy to balance urban and rural development brought about major progress in the development of a new countryside

   The Eleventh Five-Year Plan identified the development of a new socialist countryside as an important strategic task. Under the guidance of a series of policies formulated by the CPC Central Committee, efforts to promote developed production, affluent standards of living, civilized rural communities, clean and tidy village surroundings and democratic management in the countryside have been met with stable progress and positive results. These achievements have not only allowed rural residents to enjoy tangible benefits, but also significantly changed the face of rural areas. The establishment of six systems in rural areas brought rural reforms into a new stage of institutional development, effectively stimulating overall rural development. These six institutional measures included stabilizing and improving the basic system of rural operation, establishing a sound, strict and standardized rural land management system, enhancing government support and protection systems for agriculture, introducing a modern financial system for rural areas, developing a system to promote the integration of economic and social development in urban and rural areas, and improving the democratic management system for rural areas. In particular, measures aimed at integrating urban and rural development in six aspects proved highly effective in invigorating the development of a new countryside. The integration of urban and rural planning, which effectively brings the planning of urban and rural areas under a unified overall plan, allowed for a more rational distribution of protected farmland, industrial areas, commercial areas, residential areas, recreational areas and ecological conservation areas. Such planning also allowed the functions of various different areas to complement one another. The integration of urban and rural industrial development effectively promoted economic integration between urban and rural areas. The integration of urban and rural infrastructure has extended urban roads, water, electricity and gas supplies, as well as refuse and sewage treatment facilities into rural areas. The integration of urban and rural public services has taken us closer to our goal of achieving unified standards in education, medical care and social security for both urban and rural areas. The integration of urban and rural factor markets effectively promoted the two-way free flow of factors of production, such as capital, technology and personnel, between urban and rural areas. The integration of social management in urban and rural areas will involve the establishment of unified systems for community-level democracy and the management of household registration.

   V. Plans to balance regional development led to the accelerated development of central and western regions

   Balancing the development of different regions is an important aspect of the Scientific Outlook on Development. The Proposal of the CPC Central Committee for Formulating the Eleventh Five-Year Plan for National Economic and Social Development stated that the development of underdeveloped areas should be accelerated by taking advantage of market forces and mechanisms for cooperation, mutual assistance and support. These four measures have played an important role over the past five years, effectively driving forward the development of central and western regions. Drawing on market forces, central and western regions took steps to improve their investment climate in a bid to accommodate industries that were relocating from coastal regions. As a result, investment grew at a significantly higher rate in central and western regions than in eastern regions during this period. Provinces, autonomous regions and municipalities under the central government in northern China began to play a leading role in national economic development. By making full use of their sound transportation links, abundant resources and dense populations, central regions managed to improve industries and develop the tertiary sector whilst ensuring constant increases in grain production capacity. This served to rapidly enhance the economic strength of these regions. New vitality was injected into the old industrial bases of the northeast following the introduction of funds and technology to upgrade traditional industries. These things have demonstrated that market forces have become the main driving force behind the balancing of regional development. With support from different levels of local government, cooperation between enterprises in the production and sale of bulk commodities has allowed different regions to give play to their respective strengths. Mutual assistance mechanisms, in which developed regions provide coordinated assistance to underdeveloped regions, played an important role in reconstruction efforts following natural disasters and in the provision of aid to underdeveloped regions. To accomplish this, developed regions devoted large amounts of talented personnel and funds, making major contributions in the campaign to support underdeveloped regions. Support mechanisms were launched to provide more transfer payments to central and western regions from the central budget. These initiatives gave priority to infrastructure development projects in central and western regions, effectively providing impetus for development in these regions. Projects to transfer natural gas and electricity from western to eastern regions and build major transportation arteries adjoining China’s western and eastern regions were successively completed, providing a more solid foundation for economic development in central and western regions. As a successful practice developed during the course of the Eleventh Five-Year Plan period, the use of these “four mechanisms” as a means of promoting balanced regional development has demonstrated the superiority of the socialist system.

   VI. Enhanced efforts to reduce energy consumption and cut emissions contributed to the formation of a resource-conserving society

   The Eleventh Five-Year Plan set forth the target of reducing energy consumption per unit of GDP by 20%, and cutting COD and sulfur dioxide emissions by 10%. This is a task of enormous difficulty. Moreover, the implementation of the economic stimulus plan led to substantial increases in the demand for energy and raw materials, which has made the task of achieving this goal even more challenging. Nevertheless, the State Council remained committed to accomplishing this task, mobilizing the whole country in a concerted effort to reduce energy consumption and cut emissions. It pushed forward ten major energy conservation projects, a campaign to save energy in enterprises, and a project to promote energy-efficient products that benefit the people. These initiatives created a sound social climate for the conservation of energy. Increased emphasis was given to environmental protection. We made increased efforts to improve the environment in key watersheds and regions, treat urban sewage and garbage, deal with pollution from non-point agricultural sources, and comprehensively clean-up heavy metal pollution. We vigorously developed the circular economy and industries for energy conservation and environmental protection, and also launched public campaigns to conserve energy, water, land and materials. We improved our ability to adapt to and mitigate the effects of climate change, making efforts to develop low-carbon technologies, promote the application of highly efficient and energy-conserving technologies, and develop new and renewable energies. We accelerated afforestation initiatives and increased the area of forest carbon sinks. With unremitting efforts in various aspects, we are confident that our goals in energy consumption and emissions reduction can be achieved.

(Originally appeared in Qiushi Journal, Chinese edition, No.20, 2010)

Note:Author: Deputy Director of the Committee for Economic Affairs of the National Committee of the Chinese People’s Political Consultative Conference


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