Next week the Communist Party’s Central Committee will outline China’s 14th five-year plan, which will run from 2021 through to 2025 and will set out its ambitions and targets for the next 15 years. The outlined plan will not be publicly available until it has been formally approved by the National People’s Congress (NPC), in March, however, we expect some key snippets to be released on the newswires once the plenum is concluded on Thursday.
The four-day plenum which kicks-off on Monday could give further clues into the county’s pivot to a more domestic-driven and self-reliant economy; in-line with the “Dual Circulation”strategy. As regular readers will remember we wrote about China's President Xi Jinping emphasised the “dual circulation” development model, where there will be a greater focus on the “super-large” domestic market, with less reliance on exports. This is nothing new as policymakers have reiterated the importance of a shift to a domestic-led “new normal” for many years. Some may perceive this evolved strategy as a way of closing the door to the outside world, however, this would hinder the country’s push to internationalise. So, faced with the current geopolitical climate (and US protectionism) coupled with a strained global supply chain, it appears China is taking steps to both firm up trade deals and foreign investment channels, and importantly: strengthen domestic technology, drive domestic competition, improve efficiency and fund infrastructure projects.
Having resisted setting an annual growth target this year, it will be interesting to see if officials will look to set GDP targets within the five-year plan, or provide a broad scope objective. Of note, the previous five-year GDP target was set at an average of “above 6.5%”. Estimates show that China will return to trend rates by Q1’21, however, growth is expected to spike exceptionally higher on a year-on-year basis due to the low base comparison, resulting from the Covid-19 economic fallout in the first half of this year.
Last month Xi pledged that China, the world’s top polluter, would be carbon neutral by 2060. He said “China will scale up its intended nationally determined contributions [under the Paris climate agreement] by adopting more vigorous policies and measures,” calling for a “green recovery” from the coronavirus pandemic. We expect to hear further details and concrete implementation in regards to the nation’s push for cleaner energy, in the five-year plan, particularly across the energy, transportation and construction sectors.
Technology is also expected to be high up on the agenda, given the current US-China tech war developments. Also of interest will be the 15-year trajectory, particularly further details on the nation's goal to become a “modern power” by 2050.
The renminbi has maintained its appreciation this month, having gained 2.06% against the dollar so far in October. As the economy continues to expand and the nation maintains its goal to open up its markets to international investors we maintain our view of continued long-term appreciation; which will continue to support our Renminbi strategy.