How China’s five-year plan, an overhang from the Soviet era, has evolved

The five-year plan has come a long way since 1953, when it set goals for everything from steel production to livestock. But it is still a key part of a state-controlled, centrally planned society

PUBLISHED : Tuesday, 13 October, 2015, 2:46am
UPDATED : Tuesday, 13 October, 2015, 2:46am


It's a holdover from the Soviet-style command economy, a blueprint that sets numerous targets and guidelines for a range of social, economic, educational, cultural and environmental issues.

While China has been through three decades of market-oriented economic reforms, the plan is still is a key component of China's state-controlled and centrally planned society.

It has been instrumental in much of the country's political success, though not necessarily the economic advances it enjoys today.



China's neo-liberals claim economic planning is a key characteristic of centralised economies and runs counter to the market.

Communist Party conservatives say strong state control is necessary, given the market failures in the developed West such as the sub-prime mortgage-induced financial crisis in the United States that reached a climax in 2008 and the sovereign debt crisis in Europe.



Once every five years, the party's decision-making Central Committee holds a plenum to draw up guidelines for the draft of the five-year plan before planners from central government ministries and agencies and regional governments begin to work out detailed targets and policies.

Under the direction of the party-approved guidelines, the State Council is responsible for the draft of the final document, which is tabled and debated at the annual session of the National People's Congress in the spring of the following year.



The document, which generally comes in at about 100 pages, will list the government's main policy goals, including qualitative aims such as promoting coordinated regional development and social harmony. It also contains dozens of quantitative targets, such as ones for economic growth, exports, direct foreign investment and job creation.



Almost all the central ministries and agencies and provincial-level regional and municipal governments contribute to the draft of the national plan. The National Development and Reform Commission, the top planning agency, is responsible for much of the paperwork and coordination between the several hundred agencies and institutions giving input.

All regional governments, from the provincial level to county administrations, and all the industries and business sectors will also have to draw up their own five-year plans.



China began its first five-year plan in 1953, copying directly from its "big brother", the Soviet Union. Between then and 1976, when chairman Mao Zedong died, China was entrenched in the state-planning era.

The first plan laid out specific goals for everything from economic growth to steel production and livestock numbers. Back then, the government decided what people could consume, with production set by planners, not market demand.

The economic balance swung towards the market in the last decade and the government now refers to the plan as its "Social and Economic Programme". It has shed its Stalinist overtones and focuses on policy priorities, abandoning all but a few numerical targets.

University of Chicago political science Professor Dali Yang said that historically, central planning in China never gained the status, complexity and sophistication that it reached in the Soviet Union.

"Indeed, one could argue the People's Republic of China genuinely practiced central planning only during three years of the first five-year plan period," Yang said.

Yang said the central government continued to issue growth targets for gross domestic product each year and in its five-year plans, but such numbers, particularly those for five-year periods, were largely forecasting exercises.

Yang said that for much of the last 15 years, the economy had overshot government target growth numbers by large margins, suggesting that government targets were honoured in the breach.

"It was only since 2012 that Chinese GDP growth numbers came to be very close to the targets of between 7 to 8 per cent per year," Yang told the US Senate's US-China Economic and Security Review Commission panel on April 22.

However, Jianguang Shen, chief China economist with Mizuho Securities, said the five-year plan targets still played an important role in ensuring government officials fulfilled their responsibilities.

"Five-year plans can be thought of as a 'government task list' as well as a way to monitor the government officials who must accomplish these tasks," Shen said.