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  June 2nd, 2016 | Written by

China’s Latest Five-Year Plan: An Economy Still Driven From the Top

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  • China's five-year plans are an authoritative source of information on how elites view the economy and society.
  • China's latest five-year plan shows the country's leadership views its old growth model as out of date.
  • China's latest five-year plan seeks a rebalancing of the Chinese economy and an effort to make it more efficient.

Despite the changing nature of the Chinese economy and the laughable practice of issuing five-year plans from a free-market perspective, the plans released by the Communist Party that rules the People’s Republic remain an authoritative source of information on how the elites in China view the direction of its economy and society.

The recently released thirteenth five-year plan shows that there is consensus among the country’s leadership that its old growth model of extensive investment is out of date and that the future will see a rebalancing of the Chinese economy and an effort to make it more efficient.

Those were some of the conclusions of an analysis of the latest five-year plan released by the Washington, DC, think tank CSIS.

“The plan puts heavy emphasis on streamlining manufacturing, promoting innovation, and encouraging the development of advanced technologies,” the report said. “It also emphasizes greater environmental protection, a stronger social safety net, and expanding China’s place on the global economic stage.”

One thing the plan does not do is to shift the relationship between the state and the economy. The plan seeks to strengthen certain market institutions but central to the plan remains mobilizing capital for priority areas and other interventionist economic policies.

“This is a plan to improve the current system—to strengthen China, Inc.—not to transform it,” the CSIS report concluded.

The CSIS analysis sees the five-year plan as a recipe for “growth with volatility” given its continued refusal to migrate to a more market-oriented economy. “China may become an inefficient technology power,” the report said, “with a highly leveraged financial system and vulnerable to wide swings in its business cycle.”

Foreign companies that “feed into China’s growth machine” should do well under the thirteenth five-year plan, the report concluded, while those that seek to compete with entrenched state-owned enterprises or seek access to areas of the economy that the government still refuses to open up “will continue to face major challenges.”