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China - 10th Five-Year Plan 2001-2005

The government manages the country’s economy through five-year economic and social development plans. Each five-year plan establishes the general framework of the country’s agricultural, industrial, financial and other economic and social policy during the five-year period. Although the central government’s plans provide the guidelines for overall economic development, local governments have considerable autonomy with respect to the development of some sectors.

China’s leaders viewed continued economic growth and reform as essential to managing internal and external security challenges, and they assess that China must maintain at least a 7 percent annual increase in gross domestic product for the duration of the 10th Five-Year Plan period (2001-05) to sustain the momentum from the previous decade. The imperative for growth necessitates that China prioritize investment in agriculture, industry, and science and technology ahead of purely military endeavors, implying there are inherent limits to China’s ability--and willingness at present--to provide resources for military modernization. Reinforcing these limits are pressing structural reforms, to include financial sector reform, which if left unattended could serve as a drag on economic growth and a source for instability.

China relied heavily on former Soviet Union (FSU) governments for access to modern weapons, materials, and technical support to achieve strategic goals established under the 10th Five-Year Plan (2001-05) defense modernization program. However, as this program approaches completion, Beijing may experience problems in meeting some of its modernization goals, with actual deliveries falling about 27 percent in 2003 and new agreements off by about two-thirds over 2002 levels. China’s arms imports now are experiencing a moderate decline, which most likely results from a surge in imports in recent years coupled with the PLA’s difficulty in integrating modern weapons into a force comprising mostly1960s technology. One of the top priorities for the PLAN during the 10th Five-Year Plan is manufacturing submarines. Where Beijing believes domestic production cannot meet defense needs it has contracted, mainly with Russia and Ukraine, to purchase weapons and equipment.

On March 16, 2001, the National People’s Congress approved the country’s tenth five-year plan, which covers the period from 2001 to 2005. This plan calls for doubling the country’s GDP by the year 2010 (over that of 2000) and achieving an average annual growth rate of 7.0%. In addition, the tenth five-year plan includes the following objectives:

• Increase the international competitiveness of China’s economic institutions through measures such as reorganizing, merging or publicly listing the country’s state-owned enterprises;
• Strengthen China’s technological innovation by supporting education and research and development;
• Keep the country’s registered urban unemployment rate at approximately 5.0%;
• Develop China’s western regions by improving basic infrastructure and through other programs; and
• Improve the country’s foreign investment environment in line with China’s WTO commitments.

The government designed these development plans on the basis of its assumptions and estimates of future events and developments, including the state of overall economic and social developments in China. Therefore, the objectives, goals and targets contained in the plans are subject to uncertainties beyond China’s control. The government may also adjust its plans if actual developments materially deviate from its previous assumptions and estimates. At present, factors likely to adversely affect China’s economy include, among others:

• Unbalanced economic development in different geographic regions;
• Slow development of the agricultural sector and low income of farmers;
• Continued transition to a market economy;
• The state of the banking industry, including significant levels of non-performing loans;
• Scarcity of certain natural resources, such as arable land, petroleum and water;
• Relatively under-developed science, technology and education system;
• Difficulty in reforming state-owned enterprises;
• Increasing rate of unemployment and pressure on the government for social welfare relief; and
• Natural disasters, including diseases such as the recent outbreak of severe acute respiratory syndrome, or SARS.

China’s 10th Five-Year Plan (2001-2005) called for the construction and use of strategic petroleum reserves by 2005. Construction has begun at one of four sites slated to store government-owned supplies. Chinese officials plan to gradually fill up to 100 million barrels of storage by 2008 (equivalent to 35 days of imports then). Original plans called for boosting stocks to 50 days imports in 2010, but this may be slightly delayed. On the other hand, the recent surge in imports has led Chinese policymakers to consider an even more aggressive long-term plan for 90 days of stocks, perhaps by 2020.

The Chinese government hopes to create a unified national power grid network by 2020. The West-East Electricity Transfer Project, as proposed in the 10th Five-Year Plan, requires the construction of three major west-east transmission corridors: North, Central, and South. The transmission capacity of each corridor is expected to reach 20 GW in 2020.

China’s Tenth Five-Year Plan (2001-2005) states: “The production capacity of solar energy, wind energy, and geothermal energy should be increased.” Although the plan does not set forth specific development objectives, the focus on renewable energy is clear and the concept of sustainable development plays a key role.

The slogan “Keep on implementing—ride the wind,” was often repeated in reference to new and renewable energies and the goal of expediting the localization of wind turbines. Wind farms are planned for Xinjiang, Inner Mongolia, Hebei, Jilin, Liaoning, Hubei, and Guangdong provinces with a combined capacity of 500 MW. China planned to build large wind farms in areas with proper conditions, invite international tenders, and develop large wind farm pilot projects. Meanwhile, as the Ride the Wind project was carried out, significant efforts need to be made to enhance China’s ability to develop and manufacture large wind turbines. The goal is to reduce production costs and increase the localization percentage of wind turbines from 40% to 70% by the end of the Tenth Five-Year Plan period.

The Tenth Five-Year Plan (2001-2005) was the era in which China first articulated plans to ramp up a renewable-energy industry. At the start of this five-year period, China had essentially no domestic solar industry, and the global industry itself was tiny. In a document called the Tenth Five-Year Plan for New- and RenewableEnergy-Industry Development, China’s State Economic and Trade Commission, the predecessor of the country’s current economic-planning agency, the NDRC, laid out a vision to industrialize renewable-energy industries by building in China economies of scale. The plan treated solar as an industry first and a research area second—in many ways the opposite of the U.S. federal government’s approach. It called for China to scale up solar-cell and -module production, and in so doing to develop a robust solar supply chain. History proved the plan far too tame. By 2005, China’s solar-cell-manufacturing capacity was 500 megawatts, 33 times the Tenth Five-Year Plan’s goal.

With China’s significant role on pollution emissions and related health damage, deep and up-to-date understanding of China’s air pollution policies is of worldwide relevance. Based on scientific evidence for the evolution of air pollution and the institutional background of environmental governance in China, the early policies, until 2005, were ineffective at reducing emissions. It is well known that energy (or more precisely coal) is the primary source of air pollution and carbon emissions in China, and the closely related energy and climate polices are also experiencing significant changes.