Beijing plans to move from ‘Made in China’ to ‘Sold in Shanghai’

Keen that China remains a global economic leader, China’s Communist Party (CCP) leadership unveiled a new development strategy calling for the rapid and qualitative upgrading of its human resource skills and capacity for innovation in science and technology.

After a year’s discussions at senior echelons and deliberations by the Party’s top decision-making body — the Politburo — spread over six months, the plans were approved at the ten-day session of China’s version of a parliament, the National People’s Congress, which opened in Beijing on March 5, 2011. If successful, the new strategy will place China on a fast-track high development path.

Boldly discarding the economic model followed by China for the past three decades, Chinese President Hu Jintao and Premier Wen Jiabao have initiated programmes across China to upgrade human resource skills, with pronounced emphasis on science and technology, and to boost domestic consumption. Care is being taken to retain the CCP’s popularity and support among the masses. China’s leadership has decided on these changes despite apprehension that ‘social conflicts in some localities will be another factor hindering the country’s economic development’.

The main features of the new strategy are: converting China from being the ‘world’s manufacturer’ to becoming the ‘world’s consumer’; upgrading its scientific and technological capabilities for increased innovation; expanding education; improving living conditions and increasing wages of the people, especially those in rural areas.

Emphasising science and technology, the NDRC report stressed promotion of projects in the National Broadband Internet Agenda, cloud computing, the ‘Internet of Things’, integrated circuits, flat panel displays, space infrastructure, regional aircraft and industrialisation of general aviation aircraft as well as health and internet application.

Provision has been made for a 12.5% increase in the budget allocated for science and technology in 2011, raising it to $29.9 billion ($1=Yuan 6.5). Substantial funds have been earmarked, including those for basic research, key national laboratories and for research in cutting edge technology.

Education is integral to this effort and spending on education in 2011 is planned to reach 4 per cent of GDP. $45.56 billion has been appropriated for education in 2011. Plans call for increasing enrolment this year to 6.75 million undergraduate students and 5,60,000 graduate students in regular institutions of higher learning.

Highlights of the Twelfth Five Year Plan are: population will be controlled below 1.39 billion, or natural growth rate will be kept under 6.5 per cent; the economic growth rate is targeted to average out over five years at 7 per cent with GDP exceeding $8.46 trillion (RMB), up from the $6.12 trillion in 2010; value added output of emerging strategic industries will account for 8%of GDP; coastal regions will transform from being the “world’s factory” to the hub of R&D, high-end manufacturing and service sector; spending on R&D will rise to 2.2% of GDP; foreign investment will be welcomed in agriculture, high-tech and environment protection industries and nuclear power will be developed more efficiently with preconditions of ensuring safety; construction of large scale hydropower plants will gain momentum in south-west China; the country’s optical cables will extend to 10.95 million kms; length of high speed railway will increase by 13,000km to reach 45,000km; length of the highway network will reach 83,000 km; China will open six new airports to air traffic, including a new airport at Beijing; and China will build 36 million affordable apartments for low-income people.

Specific mention was made of expanding use of the RMB in cross-border trade and investment and making it convertible under capital accounts. China’s policies will be amended to facilitate Chinese companies to ‘go global’.

China’s new economic strategy has far-reaching implications, including some that directly affect India. Communist philosophy is being steadily diluted with legitimisation of private business as part of the economic landscape. The emphasis on R&D and science and technology will launch China on to a faster, higher track in innovation, manufacturing and defence. Double-digit hikes in defence budgets, as GDP grows to an estimated $8.46 trillion by 2015, combined with the attendant acquisition of hi-tech weaponry will have obvious implications.

Finally, China’s trading partners will keenly watch implementation of the new economic programme in the expectation that increased domestic consumption will facilitate exports by them. However, an unstated downside is that as China succeeds, its surplus savings will be reduced leaving it with less to invest in US treasury bills.

The author is a former additional secretary in the cabinet secretariat, government of India.