China's 12th Five-Year Plan: Is It So Wrong to Plan Ahead?

by Edward Goldstick

Having just read Damien Ma's report about the current "standings" on the global economic scene when I remembered an email from a Taiwan-based electronics display industry intel shop with this eye-catching graphic that leads to the report that follows:

Abstract: China's 12th Five-Year Plan makes it clear that the county, which overtook Japan in 2010 to become the world's number two economy, has now turned its attention from the pursuit of national strength to increasing its people's prosperity. It places far greater emphasis on internal markets and domestic demand than ever before, and includes industrial structures that emphasize added value. China's 12th Five-Year Plan also sets out seven major new strategic industries, for which investment is projected to reach CNY10 trillion over the next five years; the sheer scale of the commercial opportunities created needs no further explanation. This report looks at the core directions for development in China's 12th Five-Year Plan.

I have no intention of spending $999 for the entire report, but I find the breadth of the presentation interesting as represented by the table of contents*; however, I would like to offer three gut-level opinions when considering the conceptual value of "planning" on this scale as compared to the still relatively uncoordinated, ad hoc, and reactive approach that is typically American:

1)  I might be taking a risk if I suggest that Japan's renowned MITI (Ministry of International Trade and Industry) was a fundamental force that guided Japan's resurgence in the post-war period but that it was not fundamentally responsible for the real estate bubble and the stagnation of the Japanese economy that led to the Lost Decade and the difficulties that have endured since... so how a government exploits the surpluses that accumulate during periods of growth is as important and the planning that leads to that opportunity.

2) It is perfectly true that central planning under the Soviet regimes was overwrought with heavy industry and gargantuan conceptions that failed to take into account the practical needs of real people (that led to consumer-oriented washing machines designed after those in industrial laundries designs but that would not fit through the doors of ordinary homes).

3) Many commentators argue that the current strength of the Chinese economy is entirely built upon an export industry that presumes US consumers as its principal clients.  My understanding is that this was not the case during the first ten years or so when significant investments were made to abate poverty in rural areas and distant provinces to develop a workforce that could then energize the quasi-capitalistic industrial activities that followed... so what if they now manage to use the relative wealth that returns to the countryside as a foundation for a multiplying domestic consumer demand?

There seems to be an assumption in the air that the Chinese "need us" as consumers as much as we need them as producers (and as lenders), so what happens if the goal of invigorating their internal demand that in many multiples of our own comes to fruition?

While I certainly would be interested to hear what Mr. Ma (or Jim Fallows, for that matter) have to add (or subtract) from my observations, the first reaction that I had when I read this was to wonder whether Liam Casey ("Mr. China"?) was discovering that his clients are increasingly designing products specifically for the domestic markets of China (and Asia, in general)...

P.S.:  I'll go out on a limb and suggest that the biggest difference between Egypt and China when it comes to the discontent of the median citizen with access to information is that the Chinese citizen will read about the new Five-Year Plan in the China Daily (though perhaps with the flourishes that have often amused us in translation in Fallows' blog) while the Egyptian citizenry will have seen little of all that investment and activity unless they are (or should I say were) fortunate enough to be connected with the powerful few... and even then, the actual coherence and visibility of any planning is probably minute and hardly reliable.

Edward Goldstick is a veteran of the high-tech, software, defense, and energy-technology worlds in the U.S. and France.

*The post originally implied that the report's charts were freely available, which they are not. We regret the error.