China’s five-year plan: A user guide for business success in the Central Kingdom

Businesses must remain agile as they learn how to interpret China’s new policies

China is now entering the final year of its 12th Five Year Plan. For over six decades, the Chinese central government has been endorsing these five-year plans as a means of establishing national priorities for society and the economy. Thus, these plans provide valuable direction for firms hoping to conduct business with—or within—the People’s Republic of China. The overarching goal of the current plan is to sustain the tremendous growth the Chinese economy has experienced over the past 30 years.

Background

The Chinese government began endorsing five-year plans for economic and social development in 1953. The First Five Year Plan (1953-1957) focused on industrial growth coupled with central planning, state ownership in most sectors, and large, multi-family cooperatives tasked with collectively developing agriculture. The key goals at that time were the development of iron and steel manufacturing, coal mining, cement production and machine building.

The Second Five Year Plan (1958-1962), a.k.a., the Great Leap Forward, attempted to greatly increase industrial and agricultural output simultaneously. But things did not work out as hoped. Steel made in “back-yard” smelting plants, as well the machinery being churned out from new factories, soon began falling apart. This failed rush to rapid industrialization, along with the transfer of so many workers from agriculture to industry, contributed to the three years of the Great Chinese Famine.

China has learned a lot since these early attempts at reform, however, and the objectives of its more recent five-year plans are not unlike those of any other modern nation that is grappling with pollution, the depletion of scarce resources and increasing wealth disparity. National goals are now much more realistic, and the results have often exceed expectations. For example, the 11th Five-Year Plan (2006-2010) called for 7.5 percent annual growth in GDP, but the actual increase was closer to 11 percent.

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