- China's 12th Five-Year Plan For National Economic And Social Development Provides A Glimpse Of China's Industrial Focus In The Near Term
- April 7, 2011 | Authors: Gilbert B. Kaplan; Jeffrey M. Telep
- Law Firm: King & Spalding LLP - Washington Office
China's much anticipated 12th Five-Year Plan for National Economic and Social Development ("the Plan") was approved by the People's Congress on March 14. The Plan has important implications for industries around the world, because it highlights the Chinese government's areas of focus for the next five years. The Plan sets as a goal seven percent annual growth for the Chinese economy and establishes industrial goals and identifies key growth industries for the period of 2011 to 2015. The Chinese government intends to promote manufacturing industries, especially nine key industries: equipment manufacturing; shipbuilding; automobiles; iron and steel; non-ferrous metals; building materials; petroleum and chemicals; light industry; and textiles.
The Plan also continues to emphasize the importance of the seven strategic industries: energy-efficiency and environmental protection; new-generation information technology; biology; high-end equipment manufacturing; renewable energy; new materials; and new-energy cars. The Plan aims to improve Chinese companies' competitiveness in the world market.
Local governments are expected to formulate derivative plans and policies for their own jurisdictions and industries to achieve the goals and tasks specified by central authorities in the Plan. For example, the Shanghai Municipality already has established a 10 billion RMB fund to support the industrialization and development of high-tech industries in its jurisdiction from 2011 to 2015. Guangdong Province similarly is planning to allocate 2 billion RMB each year, amounting to 10 billion RMB in total, to support the development of strategic industries, as well as other subsidy programs. Hebei Province has set an annual goal of 8.5 percent for its GDP growth, has called for reforming and upgrading manufacturing industries, including the iron and steel industry and the petrochemical industry, and improving the seven strategic industries, and further encourages exploring the world market and increasing the total trade value of the province to $70 billion by 2015.
The Chinese government's promotion of the nine key manufacturing industries and the seven strategic industries will affect U.S. companies competing in these industries. Commerce has found that key industries and projects identified in previous Five-Year Plans receive significant subsidies from both the central government and local governments in various forms, including loans, grants, tax incentives, and low-priced inputs. Companies active in the industries identified for special treatment by Chinese central planning should be aware that the Plan may result in increased subsidization by the Chinese government in these areas, affecting trade flows and product competitiveness.