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China - 8th Five-Year Plan 1991-1995

China’s Outline of the Ten-Year Program and of the Eighth Five-Year Plan for National Economic and Social Development summarized the government’s economic development strategy and investment plans for the years 199l-2000. As part of the “major tasks and important targets” of the plan, the Chinese government seeks to readjust China’s industrial structure and gradually modernize the national economy. The plan focuses on six priority sectors: basic industries and infrastructure (such as energy, transport, and communications); electronics; agriculture; construction and services; defense; and processing industries.

China's economy has seen consistent growth since Deng Xiaoping's policy of economic reform and opening began in 1978. For much of the 1980s and early 1990s, the nation enjoyed double-digit rates of GDP growth. That growth began to slow, however, in 1992, and remained in decline as a result of inflation, fallout from the Asian financial crises, sluggish domestic demand, rising unemployment, and eventually deflation.

The Eighth Five-Year Plan proposes total investment of 2,600 billion yuan - about 32 percent of gross national product (GNP) between 1991 and 1995.* Of this amount, state investment will constitute about 1,700 billion yuan, or 65 percerkg Slightly less than half of China’s proposed state investment is slated for capital construction, with priority given to knergy resources, transportation, communications, raw and semifinished materials, agriculture, and water conservation.

While the outline version of the plan did not contain detailed information on production and investment targets for individual subsectors, the priorities identified are reflected in China’s investment allocations, according to the World Bank. For example, state investment in energy ess expected to rise from 30 percent of the total in the Seventh Five-Year Plan to about 35 percent under the present plan. By developing hydropower, thermal power, and nuclear power-generating capacity, China plannrf to increase its total annual output of electricity by 31 percent between 1991 and 1995. The transport and telecommunications sectors were also expected I to receive a larger share of state investment, with their combined share rising from 15 percent under the Seventh Five-Year Plan to about 18 percent under the current plan, according to the World Bank.

Based on the Eighth Five-Year Plan, China intended to upgrade old railways using advanced technology, to build highways and airports, to increase coastal harbor construction, and to develop the telecommunications industry. In addition, China planned to advance its electronics industry by developing integrated circuits, computers, microelectronic technology, and telecommunications technology and equipment.

Semiconductor production, an industry where the United States has long been a global leader in the most valueadded segments of the supply chain, is chief among the industries in which China is actively encouraging imports to develop domestic capacity. Building local semiconductor production capabilities has been a policy priority for the Chinese government since the Eighth Five-Year Plan in the mid-1990s.

As GDP grew, so did rates of total investment in pollution control. In fact, Total Investment in Pollution Control (TIPC)'s percentage of total GDP increased even as the GDP growth rate slowed. Investment during the eighth Five Year Plan was 2.7 times that in the seventh Five Year Plan, and Ninth Five Year Plan expenditure exceeded that of the eighth. Environmental investment's average percentage of GDP rose from 0.6 percent in the seventh Five Year Plan to 0.77 percent in the eighth. By the end of the Ninth Five Year Plan, investment reached 1 percent of GDP.

It was the assessment of the World Bank that China was undergoing four types of structural change. Any one of these changes could result in a significant reallocation of resources or income distribution, affecting the economy as a whole. However, all four changes are occurring simultaneously:

1. A shift from an agricultural-based economy to an economy predominantly based on manufacturing and services. Between 1980 and 1999, agriculture's percentage of total output declined from 30 percent to 18 percent, and the share of the work force in the agricultural sector fell from 69 percent to 47 percent. During the 1990s, jobs in the agricultural sector decreased by about 3.4 million per year, while jobs in the services sector increased by 8 million per year.
2. A demographic profile shift from high fertility and low longevity to low fertility and high longevity. The population growth rate has slowed from 1.9 percent per year in 1980 to 0.88 percent in 1999. Life expectancy rose from 67 years of age in 1980 to 69.5 years of age in 1997. The population's share of children (14 years of age and below) has fallen from 35.5 percent in 1980 to an estimated 24.9 percent in 2000, while the aged population (65 years of age and above) rose from 4.7 percent in 1980 to an estimated 6.7 percent in 2000.
3. A shift from a relatively closed to a relatively open economy. External trade in China is now conducted through over 200,000 direct import-export enterprises, as opposed to the 10-16 state trading firms that once controlled all import and export activities. Non-tariff trade barriers have fallen to an estimated tariff-equivalent level of 9.3 percent, affecting 33 percent of imports. The average weighted tariff rate for the economy is an estimated 18 percent. Approximately three-quarters of imports receive very low tariffs or none at all.
4. A shift from a command economy to a market economy, which began after China's opening up in 1978 and is marked by progressively deregulated prices and resource allocation decisions as well as decreased state activity in the economy. The shares of retail, agricultural, and capital/industrial goods sold at prices fixed by the state fell from 97 percent to 5 percent, 94 percent to 23 percent, and 100 percent to 12 percent, respectively, between 1978 and 1999; the public sector's share of total fixed investment fell from 82 percent in 1980 to 53 percent in 1999; and direct investment funding from the government budget fell from 30 percent to 6 percent over the same period of time.

Support of research relevant to high technology through the regular planning process continues to be evident in the recently announced basic research priorities for the eighth FYP. These include high-temperature super-conductivity, the structure and properties of optoelectronic materials, semi-conductor super-lattice physics, as well as projects pertaining to biotechnology, geophysics, and the environment.

By the mid-1980s, with more funds becoming available for S&T, the expansion of the technical manpower pool, (including the return of technical personnel from advanced study of abroad), and a deepened appreciation of the world high-technology revolution, a consensus was developing that China could not afford not to get into high technology more ambitiously. In March of 1986, laser specialist Wang Dahang and three other senior scientists wrote to Deng Xiaoping urging the initiation of a new national high-technology program. The Party Central Committee approved the idea in October, and the program began in early 1987 as the National High Technology Development Program (referred to in China as baliusan literally, 86/3, or March 1986). The Program reportedly, ".. . aims to pool together the best technological resources in China over the next 15 years to keep up with international high technology development, bridge the gap between China and other countries in several most important areas, and wherever possible, strive for breakthroughs. The programme also aims to provide technological backup for economic development and train large numbers of talent for the future."

As a way to stimulate the development of the nuclear industry, the State Council has issued a circular calling for the incorporation of the nuclear industry into the Ministry of Energy, subject to its overall planning, financing, and management, and to list the nuclear budget for the Eighth Five-Year Plan as "nonoperational" expenses, relieving the first few domestic nuclear plants from debt repayment burdens. Nevertheless, the needed investment for conversion of military plants to civilian production, treatment of nuclear waste, environmental protection, and repair and maintenance is expected to exceed central government capabilities; as a result, the industry has also promoted the involvement of provin- cial and local governments and enterprises in nuclear-related development.