22 November, 2015
The Communist Party of China has recently released the 13th Five Year Plan (“Plan”) at the Fifth Plenary Session of the 18th Party Congress. The Plan is a strategic road map that will shape China’s economic and social developments from 2016 to 2020.
With a view to sustaining a balanced economic growth and move China away from an export-reliant to a high-income and innovation-oriented economy, the Plan highlights the ideas of innovation, greater coordination, green growth, open development and a sharing economy.
The Plan encourages the development of new technologies, businesses and industries. The development of innovative green industries, such as new-energy vehicles, will continue to be promoted. Innovation has been frequently emphasized as a key part of China’s national development in recent years. Back in June this year, the State Council has issued an opinion to boost mass entrepreneurship and innovation. According to the opinion, banks are encouraged to cooperate with other financial institutions to support start-up enterprises and measures will be introduced to encourage state-owned enterprises to invest in new businesses. Details of new funding measures are also expected to be rolled out in due course.
The Plan also highlights the need to promote the experiences of the Free Trade Zones (“FTZs”) and a wider application of the “negative list” (負面清單) system. This is in line with the recent policy of China as evidenced by the expansion of the Shanghai FTZ and the establishment of the three new FTZs in Tianjin, Fujian and Guangdong in April 2015. The “negative list” system, which was first adopted in the Shanghai FTZ, was extended to the new FTZs to the effect that pre-approval from the authorities is not required in any of the FTZs for the establishment of a foreign-invested enterprise in an industry not included on the list. This is a remarkable departure from the conventional approval-based system. The Plan’s reference to the same confirms China’s commitment to further open up the market.
The Plan further refers to an orderly increase of Renminbi convertibility. In fact, soon after the close of the Fifth Plenary Session, the People’s Bank of China issued a joint statement with the Ministry of Commerce and various other ministerial-level authorities to reaffirm the Shanghai FTZ’s role as a pioneer of innovative monetary policies. The joint statement sets out China’s plan to promote more open cross-border capital flows by, among other things, allowing cross-border trades in equities and futures and expanding the use of the free trade accounts. The timing of the publication of this joint statement is a clear message of China’s determination to further its Renminbi liberalization policy. It is expected that more vigorous measures to deepen China’s financial reforms will be introduced in the coming years.
The Plan was built on existing policies and current reforms. As such, the proposals in the Plan appear to be realistic and achievable. Whilst the Plan is yet to be finalized, it is a clear statement of China’s proposed economic and development initiatives for the next five years and businesses are advised to pay close attention to all developments related thereto.
For further information, please contact:
Myles Seto, Partner, Deacons
myles.seto@deacons.com.hk
