Here’s what economists are saying about Bloomberg’s new five-year plan for China

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(Bloomberg) – Economists have focused on China’s emphasis on quality economic growth and its technological ambitions in the 14th five-year plan released on Thursday.

A statement issued after a four-day meeting of the Communist Party Central Committee gave an overview of the plan and outlined a vision for the economy through 2035.

Here’s a look at what economists are saying about the plan:

Quality growth

The press release implied an aggressive trajectory of economic expansion without explicitly mentioning the pace of growth in gross domestic product. The previous five-year plan of 2015 set a target of medium to high growth.

Thursday’s statement “said China’s per capita GDP is expected to equal the level of moderately developed countries by 2035,” economists from the Australian and New Zealand Banking Group, led by Raymond (NS 🙂 Yeung, wrote in a note. “Although no specific numbers or names were mentioned, it can reasonably be expected that China will aim to achieve levels of GDP per capita similar to those of South Korea, Israel or the United States. Spain for the next 15 years. The per capita GDP of these countries is between $ 35,000 and $ 40,000 at current prices, compared to $ 10,261 in China in 2019. “

What Bloomberg Economics Says …

Although the plan does not mention a digital growth target, “it requires a significant improvement in the quality of the economy, reflected in innovation, more advanced industrial fundamentals and a more modern economic system. To achieve these goals, he emphasized technological innovation, structural reform on the supply side, dual cycle.

– David Qu, Chinese economist

Innovation boost

UBS Group AG (SIX 🙂 said the focus on technology and innovation will accelerate an industrial upgrade.

“We believe that China could target increased spending on R&D (probably 3% of GDP by 2025) and education in the new five-year plan,” UBS economists Wang Tao and Ning Zhang wrote, in a statement. note. “In light of technological restrictions, China could allocate more resources to basic research and to borders and areas of technological bottlenecks.

Regarding its digitization plans, “we believe China will invest more in its ‘new infrastructure’, including 5G networks, artificial intelligence and data centers in the new five-year plan,” said economists.

Opening

China is committed to continuing to open its economy and take it to a “higher level”.

“The Fifth Plenum called for international collaboration through high level openness”, Barclays (LON 🙂 Plc economists headed by Chang Jian in Hong Kong wrote in a note. “The statement called for promoting trade and investment liberalization, advancing high-quality ‘Belt and Road’ development, and actively participating in the reform of the global economic governance system.”

The pledges are in line with recent comments by President Xi Jinping, who said China should actively cooperate with all countries, regions and businesses, including those in the United States, the economists wrote.

Domestic demand

China’s focus on increasing domestic demand to achieve more sustainable growth means “boosting total factor productivity and rebalancing economic development in all sectors / regions,” according to economists from Goldman Sachs Group Inc (NYSE :). written in a note.

“Although the Chinese government has been calling for a transition of the development model for several years, as the general external and internal environment has changed, we believe that the government is likely to accelerate the pace of relevant reforms over the past five years. coming years. , to achieve sustainable, balanced and high-quality growth and enter the high income group of the upper middle income group. “

© 2020 Bloomberg L.P.

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