China is in the midst of finalizing its 13th Five Year Plan, the economic and social blueprint that will guide the Chinese economy and tens of billions of dollars of new investment. This will be the first five year plan of the Xi Jinping era. According to Han Jun, one of China’s top economic planners, it focuses China’s development model on innovative industries, services, sustainable development and domestic demand.
“China will become the most attractive destination for [international] investment,” Han stated at a recent event in Ottawa. His claim is rooted in several factors. The first is Beijing’s pledge to significantly reduce restrictions on foreign direct investment over the 2016-2020 period. The second is the sheer size of China’s middle-class. According to the World Bank, China’s middle class now stands at 100 million people and continues to grow. By contrast, the United States’ middle class tops out at 92 million people. Other factors include China’s ongoing urbanization drive and the continued expansion of China’s innovation, services and consumer economies.
What does this mean for Canadian business?
Canadian companies in China or thinking about doing business in China should look at the Plan and figure out where the new Chinese investment is going regionally and by sector. This kind of intelligence can give companies a head start on their competition. Understanding the Plan will also allow companies to develop strategic marketing tools that use the latest Chinese buzzwords and make their products and services more palatable to Chinese clients. It will also demonstrate to Chinese partners that they are serious about the China market.
China’s economic reform: challenges ahead
When it comes to China’s future economic development much of the low hanging fruit has already been picked. China is entering a more challenging period that will require e ambitious structural reforms if Beijing is to maintain a GDP growth rate of 6.5%. Han and his colleagues will need to tackle capital easing restrictions on the flow of capital in and out of China, overcapacity in heavy industry, a large and rapidly growing debt burden, state-owned enterprise reform and the transition to a consumer and services driven economy.
Looking to the past, we can find solace in the fact that Beijing has an excellent record of recognizing and overcoming massive economic challenges. Looking to the future, three things are certain: the stakes are higher than ever for China and the World, China will remain on centre stage and excitement is sure to come!