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China - 11th Five-Year Plan 2006-2010

The Party has explored the concept of leveraging or integrating the combined contributions of the military and civilian sectors since the PRC’s founding. In the early 2000s the Party sought methods to enhance China’s overall development. This led Party leaders to call for improving “military-civilian integration” that echoed the collaboration between the defense and civilian sectors that China observed in the United States and other developed countries. Implementation of these efforts stalled due to a lack of centralized government control and the organizational barriers that exist across the party-state. Coinciding with the 11th Five Year Plan (FYP) (2006-2010), China began replacing “military-civilian integration” with “military-civilian fusion.” In 2007, Party officials publicly noted the change from “integration” to “fusion” was not merely cosmetic, but represented a “theoretical ‘great leap’ following a long period of trial and error.”

In contrast to earlier five year plans, the 11th FYP began to distinguish between "restricted" (yueshuxing) and "expected" (yuqixing) targets among its key indicators. Restricted targets are hard targets that local officials must meet in order to progress in their careers. Expected targets are soft targets to be carried out primarily through market forces with government support. Expected goals do not carry as much weight as restricted goals because local officials are highly incentivized to meet restricted goals since these are closely tied to the official‘s career progression within the Community Party of China (CPC). The same is not true of expected goals.

According to Chinese government figures, the 11th FYP met or exceeded seven out of eight restricted goals and 11 out of 14 expected goals. The only restricted goal the 11th FYP failed to meet was reducing energy intensity per unit of GDP, despite belated discoveries of additional GDP and a dubiously sharp shift in energy consumption and forced electricity brown-outs in several cities in late 2010 to meet those targets. Since the energy intensity reduction target was around 20 percent, and energy intensity reduction reached 19.1 percent, China officially claims that it met this indicator as well, enabling it to hit all of its restricted targets.

The three expected goals that were not reached in the 11th FYP were (1) service sector as a percentage of GDP, (2) service sector as a percentage of employment, and (3) R&D as a percentage of GDP. Despite meeting most of its targets, the 11th FYP was nevertheless unsuccessful because of its failure to address underlying structural problems. Even its overwhelming success in far exceeding its projected GDP goals can be seen as a failure, since the 11th FYP meant to rein in growth, and instead the GDP growth objectives for 2010 had already been met by 2007. The 11th FYP reflected Chinese President Hu Jintao’s stated goal of greater income balance. On official figures, however, income inequality appeared to worsen through 2009, and any gains in 2010 were insufficient to recover lost ground.

During the 11th Five-Year Plan period, the binding targets were basically achieved. Economic growth put a great strain upon the energy demand and the environment, but energy policy made a decisive contribution by promoting energy efficiency and structure. Environmental policy promoted the deployment of end-of-pipe treatment which led to the control of certain air pollutants but at the expense of an increase in energy use and in the emission of other pollutants.

As underscored by the 11th FiveYear Plan enacted a year ago, the goal is a more balanced economy that draws increasing support from private consumption and a more rational market-based allocation of saving and investment. The emphasis on the shift from the quantity to the quality of the growth experience permeated the discussions at this year’s China Development Forum. Resource conservation and environmental concerns were at the top of the agenda as defining characteristics of the coming regime change.

China is a coal- and hydro-rich country. In fact, it has the world's largest exploitable coal and hydropower capacities. As a result, coal and hydro are the two largest components in the country's electricity generation fuel structure. As of 2007, 77.73 percent of total generation capacity was powered by coal, and 20.36 percent by hydro. The Chinese electricity generation market has been experiencing rapid demand growth since the mid 1980s due to both high-speed economic growth and increasing living standards. By 2007, total generation capacity reached 713.29 GW, with system capacity increasing roughly by 60 GW each year between 2003 and 2007. Total generation capacity of 660 GW is projected by the end of the 11th Five-Year Plan (2006-2010) and 1080 GW by 2020.

China's 11th Five-Year Plan (FYP) sets an ambitious target for energy-efficiency improvement: energy intensity of the country's gross domestic product (GDP) should be reduced by 20 % from 2005 to 2010 (NDRC, 2006). This is the first time that a quantitative and binding target has been set for energy efficiency, and signals a major shift in China's strategic thinking about its long-term economic and energy development. The 20% energy intensity target also translates into an annual reduction of over 1.5 billion tons of CO2 by 2010, making the Chinese effort one of most significant carbon mitigation effort in the world.

Written at a time when China’s solar manufacturing industry was growing massively faster than the government had anticipated, the Eleventh Five-Year Plan put an increased emphasis on augmenting factory production with better R&D and more-extensive solar deployment within China. The plan acknowledged the rapid growth of solar manufacturing and the lackluster progress of Chinese solar R&D. It proposed more effort to solve technical issues such as how to produce highpurity polysilicon, a key ingredient in solar cells, and how to more seamlessly connect large solar farms to the country’s electrical grid. The growth of China’s solar industry during the period of the Eleventh Five-Year Plan was extraordinary. The country’s solar-module manufacturing capacity skyrocketed more than 17 times, from 500 megawatts in 2005 to 8,700 megawatts in 2010. Seven China-based solarmodule makers went public during these years. China-based manufacturers were, by the end of the Eleventh Five-Year Plan period in 2010, supplying more than one-third of all solar modules sold globally.

Also during these years, China significantly bolstered its domestic solar-manufacturing supply chain. Whereas in 2005 China produced at home only 10% of the polysilicon it needed for solar production, by 2010 that portion had risen to 50% — a higher portion of a vastly larger market. Similarly, whereas in 2005 China-based solar manufacturers bought essentially all of their tooling from abroad, by 2010 they were buying the majority of it at home.

The 11th Five-Year Plan addressed two issues head-on: the need for a national safety net and the imperatives of tempering rising income inequalities. Greater priority was placed on support for the woefully under-funded National Social Security Fund, which currently holds just RMB 300 billion, or roughly US$30 per capita. Emphasis was also directed at rural income support, especially tax incentives and improved medical and educational allowances. In addition, the Five-Year Plan was explicit in identifying China’s relatively undeveloped service sector as a new and important source of job creation in the future. Chinese leaders recognize the need to draw increased support from labor-intensive tertiary industries, especially those involved in distribution and delivery, like wholesale, retail, and trans-national shipping. On balance, the 11th Five-Year Plan is probably the most pro-consumer effort ever put forth by the Chinese leadership. But it underscores how far China needs to go in removing the obstacles that currently inhibit the development of a flourishing nationwide consumer culture.



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