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Asia

China's leaders to set direction for next five years

At a time of growing doubts over the Chinese government's ability to stimulate faltering growth, the country's top leaders are preparing to discuss and approve economic and social plans for the coming five years.

Since China liberalized its economy in the late 1970s, the country has undergone a remarkable transformation - from being a third-world country to becoming the world's second-biggest economy.

Displaying wealth was once considered reprehensible. But today's affluent Chinese like to flaunt their riches, and glittering skyscrapers line the streets of the Asian giant's cities. While the Chinese predominantly rode bicycles just a few decades ago, they now buy more cars annually than in any other country, thus making China the world's largest car market.

It is a paradox that the Communist Party of China (CPC) has led the country on the path of capitalism. Despite all the changes over the past several decades, a central element of Chinese policy-making has survived: The five-year plan. In older times, the plans set prices and production targets for various items such as steel and food grains, among other things.

"But the function of the five-year plan has changed considerably and it now works just as a master plan to set policy priorities," said Doris Fischer, a professor of Chinese economy at the University of Würzburg.

'Critical phase'

The CPC's Central Committee is expected to approve the 13th five-year plan at its next meeting, scheduled to take place from October 26 to 29, according to media reports.

China Volkskongress in Peking

This is China's first five-year plan under President Xi Jinping(L) and Premier Li Keqiang(R)

This is the first such plan following the transfer of power to President Xi Jinping and Premier Li Keqiang in 2013. The current plan also comes at a time of moderating Chinese economic growth, which dropped in the third quarter of this year to a six-year low of 6.9 percent.

The next five-year plan period "will be a critical phasefor buildinga moderately prosperous society in all aspects," read a statement issued by the Political Bureau of the CPC Central Committee in late July. The 13th five-year plan will focus on achieving this goal, the statement said. Furthermore, it added: "China's economy will enter into a phase of 'new normal' which presents not only strategic opportunities, but also complications and huge challenges."

Emphasis on quality

The core element of the plan is expected to be a new economic model. Addressing a group of high-ranking party officials in May, President Xi stated that quality and efficiency have to be improved. The economy should be rebalanced, making it less reliant on exports and investment, and driven more by domestic consumption, he said.

At the same time, state-owned enterprises should be reformed, although no large-scale privatizations are expected. The plan is also expected to provide hints about future economic expansion.

Analyst Fischer believes the Chinese government will cut its growth target to 6.5 percent, down from the 7 percent target in the previous plan. "But this reduction should be seen only as a political signal," she told DW, pointing to a much sharper downturn of the economy.

Fight against poverty

In terms of social policies, China is expected to announce a very ambitious target: eradicating poverty in the country by 2020.

To achieve this goal, the government may expand education and training programs, provide more financial assistance to communities and companies, accelerate the construction of infrastructure such as social housing, and improve poor people's access to health care, among other measures.

"There isn't much time and the task is extremely hard," Hong Tianyun, deputy director of China's State Council Leading Group Office of Poverty Alleviation and Development, recently said on the government's website. "If there are no special major initiatives, it will be extremely difficult to achieve this mission," Hong added.

China has done a remarkable job over the past couple of decades in terms of reducing poverty, with the country managing to pull around 600 million people out of extreme poverty.

A challenging task

China Armut Müllkippe in Hefei

China still has about 70 million people living below the poverty line

Nevertheless, about 70 million people are still living below the poverty line. They have an annual income of less than 2,300 yuan, the equivalent of around $355. The majority of poor people in China live in rural areas and in the country's underdeveloped and remotely-located western provinces.

The economic slowdown in recent years has led to increasing concerns about the rising inequality in the world's most populous nation. It also triggered worries about a potential spike in unemployment as growth decelerates and firms downsize their activities.

Statistics reported by news agency Xinhua point to the increasing difficulty in eradicating poverty at a time of cooling economic expansion. The data show that while China managed to lift 43.3 million people out of poverty in 2011, the corresponding figure for last year stood at just 12.3 million.

Additional reporting by Zhu Yuhan