China: Top leadership unveils Vision 2035; seeks to achieve “moderately developed economy” status
November 11, 2020
China is set to become a moderately developed economy by 2035. This is the conclusion of the fifth plenary of the 19th congress of the Chinese Communist Party (CCP)—a four-day gathering that took place in Beijing and ended on 29 October—which finalized the blueprint for the 14th Five-Year Plan (2021–2025) and unveiled the “Vision 2035” development program. Although the final document will be rubberstamped at the National People’s Congress (NPC) in March 2021, with concrete policies still to be fleshed out, the broad thrust of proposals will not be substantially different from the blueprint drafted by the CCP, given the NPC’s largely ceremonial role. The document focuses on new technologies and strengthening domestic demand, and while it does not give specific growth targets, it certainly outlines an ambitious agenda. That said, policy implementation will be key, as will addressing key structural concerns such as industrial overcapacity, capital misallocation and labor market distortions.
The policy statement emphasizes the “dual circulation” strategy, which seeks to reduce China’s dependence on external markets and technology. The main idea is to strengthen supply chains and modernize the industrial base via technological innovation. The so-called “new economy” has been constantly growing above the GDP average in recent years and already represented around 15% of total GDP in 2019. Therefore, new technologies appear to be ready to spearhead growth in the coming years. Another key factor is strengthening domestic demand, although the draft document does not go into specific detail on how this will be achieved.
Importantly, this year, the blueprint does not include a growth target either for the next 5-year plan or for achieving the Vision 2035 agenda. This could reflect a more flexible approach by the leadership and an increased focus on other metrics, such as employment and the quality of growth, instead of overall GDP growth. In fact, the only objective is the vague statement of GDP per capita matching the level of moderately developed economies by 2035. Despite China’s solid track record of meeting social and economic targets, the aim to catapult the economy to that level of development in 15 years is considered optimistic by some panelists. Ting Lu, Lisheng Wang and Jing Wang, economists at Nomura, argue that:
“Some provinces in China, particularly those along the Yangtze River Delta and Pearl River Delta should be able to easily achieve MDE status by 2035, but we assign a much lower likelihood to the poorer provinces.”
That said, analysts at Standard Chartered appear more upbeat:
“We expect China’s growth to average 5.5-6.0% from 2021-25, around 5% from 2026-30, and around 4.5% from 2031-35, enabling China to double GDP in real terms in 15 years and pass the ‘high-income country’ threshold in five years.”