Economic restructuring and innovation-driven growth.
The plan reflects government efforts to make growthmore inclusive and sustainable by setting an annual GDPgrowth target of 7%, and by increasing by 4 percentagepoints the share of the services sector over GDP duringthe plan’s implementation. These two targets, if met,would facilitate important restructuring and relatively high growth. Industrial policy is expected to leadinnovation-driven growth throughout the period, andseven strategic industries
have been selected to thateffect; their contribution to GDP is set to rise from 3%in 2010, to 8% in 2015, and to 15% by 2020, supported by increased research and development (R&D) spending.Increased living standards and expanded social protection.Improving people’s livelihood is a priority in thereform agenda. Proposed measures target balancingincome distribution and expanding social security coverage. The plan specifies that income per capita willrise by at least an annual average of 7% in real termsunder the plan. Employment generation stands as a key objective, and 45 million urban jobs are planned to becreated from 2011 to 2015. Reform in income distributionwill be approached by increasing the share of labor inthe primary distribution of income through wage raisesin line with labor productivity gains, and gradual increasesof minimum wages. Supportive measures target theexpansion of social security coverage. To address existingshortages of affordable housing, the plan envisages theconstruction of 36 million units of low-income housingby 2015 to cover the needs of 20% of urban households.
Resources and environmental protection. The environmental
agenda features prominently in the new plan with 7 of the12 binding targets set in this area. Energy and carbonintensity are targeted to decline by 17% and 16% per unitof GDP, respectively. Other binding targets includeincreasing the proportion of non-fossil fuels in primary energy consumption (by 3.1%), curbing the release of major pollutants (by 8%–10%), eliminating the loss of arable land (i.e., at 0%), reducing water consumption perunit of industrial value added (by 30%), and increasingforest coverage (by 1.3%).
Implementing the Plan—Policy Directions
Given the depth of the envisaged reforms, the 12thFive-Year Plan stands as one of the most important planssince the foundation of the PRC. Following the plan’sendorsement, policy making should turn to developingdetailed blueprints to guide the implementation of themain policy guidelines. Against this background, thefollowing policy recommendations are suggested.
To Support Economic Restructuring
Increasing the services sector’s share of GDP. A largerservices sector will support economic restructuring and theachievement of some social and environmental targets setin the plan. Services entail large employment generationpotential, and are 60% less emissions-intensive than theeconomy as a whole, and 90% less than manufacturing.Developing the services sector would thus absorb therural–urban migration stemming from urbanization, andreduce the carbon footprint of the expanding cities.The proposed 4 percentage point increase in the share of services in GDP is thus desirable but ambitious, takinginto account the 11th Five-Year Plan’s failure to meet its3 percentage point target by half a percentage point.
Liberalizing services. Developing services requires thetimely implementation of supporting policies, includingupgrading of human capital, removing barriers to entry,reviewing the incentive bias in manufacturing to grantequal footing to services, and opening up to foreign directinvestment in the sector. The restricted exposure of services to foreign direct investment has hampered itsimplicit technological transfer, thus limiting the expansionof the sector and the quality of the services.Fostering distributive services industries. Due to itslabor-intensive nature, a larger services sector wouldsupport government efforts to create 45 million new jobs
Industrial policy is expected tolead innovation-driven growththroughout the periodTe 12th Five-Year Plan stands asone of the most important planssince the foundation of the PRC