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

Category 2020 2025 target GDP growth rate 2.3% – Labour productivity growth 2.5% > GDP Urbanization rate 60.6% (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.      

Category 2020 2025 target Growth in R&D spending  – > 7% Innovation patents per 10,000 people 6.3 12 Digital Economy share of GDP 7.8% 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.

Category 2020 2025 target Growth in disposable income 2.1% – Urban (survey) unemployment rate 5.2% < 5.5% Average years of education of working-age population 10.8 11.3 Number of licensed physicians per thousand 2.9 3.2 Basic pension insurance (participation rate) 91% 95% Nurseries for infants under 3-year-old per thousand people 1.8 4.5 Average life expectancy 77.3 –

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.

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

Reduction of CO2 emissions per unit – 18%

Category 2020 2025 target Share of days with good air quality in cities at prefecture level and above 87% 87.5% Share of surface water at or better than class III 83.4% 85% Forest coverage rate 23.2% (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.

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.