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Source: ANBOUND
Monday, August 12, 2019

The current situation faced by China is rather complicated. Next year will be the last year of the 13th Five-Year Plan. To achieve a number of important development goals in an unprecedentedly complex situation, the development of China during the 14th Five-Year Plan will be an urgent task that has never been experienced by China before. It is worth noting that there are some signs of concern that have begun to emerge. While the general direction is clear, the operation that should be taken still fails to keep up with the pace. In addition, there is a lack of research on certain problems. An example is the preparation of the 14th Five-Year Plan". The National Development and Reform Commission (NDRC)'s 14th Five-Year Plan symposium for preparation work was in fact held in early December 2018, but this symposium seems to be rarely mentioned this year.

For China to cope with international challenges and achieve structural reforms, the 14th Five-Year Plan will play a vital role. Regardless of how complicated and volatile the situation is, China as a huge country requires the support of a major plan in its resource structure, economic relations, and industrial layout. At present, the promotion of the plan by the central ministries and commissions remains unclear. Certain local governments have begun to promote the plan's preliminary research; some are doing this ahead of time, while others are still observing. Judging from the situation and relevant needs, China urgently needs to strengthen the layout of its 14th Five-Year Plan. Through the preparation of this plan, China's economic development blueprint for the next five years will be presented to the world, and market expectations will be stabilized as a result. Therefore, the preparation of the current 14th Five-Year Plan is unique and crucial. To achieve such a goal, it is necessary to turn the preparation process of the 14th Five-Year Plan into a clear understanding of the situation and problems in order to meet the challenges.

It should be made clear that the preparation of this 14th Five-Year Plan is more difficult than the previous Five-Year plans. China is facing unprecedented domestic and international environments since its reform and opening-up. From a domestic point of view, China's economic growth rate has experienced a gap-like decline. In the future, China is likely to face a continuous decline in potential growth rate. The problems in economic and industrial structures, as well as financial risks, social security, and employment pressures, are all simultaneously. In addition, the pressure for steady growth has also increased significantly. From an international perspective, China's international trade, investment, financial and information environments are all deteriorating or have become more complicated. In particular, the geopolitical environment has reached its most complicated level in 30 years, and the international conditions it faces now is vastly different from before. In this sense, China should not just focus on itself. It also needs to take into account international interests and learn to get along with the international community.

In fact, the emphasis of the 14th Five-Year Plan should be on locating the layout of China's economy in the future and to present a blueprint for China's development under a complicated situation. With internal and external pressures, it is now an urgent task for China's economy to stabilize its growth. This is definitely not an easy task. Ever since the financial crisis took place in 2008, the Chinese economy has experienced a decline, from a 9.3% growth rate in 2011 dropping to 7.7% in 2012. After three years of continuous slowdown, it fell to 6% in 2015. This pattern of growth has continued to this day. ANBOUND is an advocator for China's steady and stable growth; it has always believed that the Chinese economy should pursue stability and its growth rate should not be too fast nor too slow. While one should not focus solely on economic growth, neither should it be completely ignored. It goes without saying that those who advocated for steady and stable growth should avoid falling into either side of the extremes.

In the future, the biggest challenge that will face China's development is whether it can maintain steady economic growth. This should be set as an important goal for China's development. We believe that in the next decade (in the next two five-year plans, i.e. the 14th and the 15th Five-Year Plans to the year 2030) if the Chinese economy can achieve a growth rate of 6%-7%, it will be considered as a huge success for the country. This not only allows China to survive the storms in recent years but also lays a solid foundation for its next step of development, which is the foundation of various tasks for stability. ANBOUND's research team believes that it takes about ten years for China to smoothen the gap opened by China's economic growth. If this goal is not met, a risk scenario might present itself. If China's economy continues to decline and the growth rate falls below 6%, it is likely that the long-standing system problems that have been accumulated for years would be triggered. If this happened, the result could very well be devastating.

In the current situation, China needs to start from doing well in the 14th Five-Year Plan and laying out for future development to maintain steady economic growth. The external economic environment will be difficult to control for China, but no matter the degree of deterioration of the external situation, China should first make internal arrangements and utilize its market well. As we have said in the past, China needs to focus on consumption, stabilize growth, expand the market, adhere to openness, and maintain its huge population market of 1.4 billion, which will effectively stabilize the Chinese economy and bring confidence to China's development.

To achieve said development progress, the decision-making of the economic sectors would be of vital importance. This requires a correct understanding of the policy environment and unbiased thinking of development, so as to ensure that there will be no mistakes in the policy formulation. Looking back at the disputes between China's academic community and the market on China's economic policies in the past two years, it can be seen that there are various opinions on whether loose monetary policy or tax cuts should be taken as important macro policies. However, without rational analysis, scientific decision-making and analyzing China's economic problems from the perspective of complex systems, it is difficult to avoid the short-sightedness and mistakes in economic decision-making. For now, policymakers need to break free from the scholars' "opinion pool" in order to form an independent and clear judgment on the future situation, so that they can make scientific decisions to lead the economy, rather than being trapped in a cycle of economic turmoil.

Final Analysis Conclusion:

China needs to accelerate the research and formulation of its 14th five-year plan so as to draw up a blueprint for its economy and realize its key goal of achieving stable economic growth of more than 6% in the next decade.

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