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Sustainability and Innovation in
China’s 12th Five-Year Plan
David Nieh, AIA AICP LEED AP
General Manager
Shui On Development, Ltd.
Confidential – not for distribution
Content
The five-year plan – a strategic approach to long-term
development
Five key themes in the 12th Five-Year Plan
Tapping China’s market opportunity
The five-year plan – a strategic
approach to long-term development
China’s impressive economic track record
GDP growth yoy
16%
14.2%
14%
12%
10.3%
9.5%f
10%
9.2%
8%
9.6%f
6%
4%
2%
2012f
2011f
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
1979
1978
0%
Source: National Bureau of Statistics, IMF (2011 and 2012 forecasts)
Average real GDP growth rate of 10.0% since the Open Door policy began in 1978
Timely and effective stimulus programme – China grew by 9.2% in 2009 and 10.3% in
2010
The IMF forecasts real GDP growth of 9.6% in 2011 and 9.5% in 2012, as China tackles
inflation through tightening monetary policy
4
Strategic approach to long-term development –
China’s five-year planning process
Chinese government leaders have demonstrated their ability to confront
important challenges and solve difficult problems
China is one of the very few socialist countries that have made a smooth
transition from a centrally planned to market economy and is a model for
other transition economies such as Vietnam
As China switched from central planning to a mixed market economy, the fiveyear plan evolved from detailed instructions into a set of guidelines and broad
social and economic goals
The national five-year ‘plan’ represents a complex web of Chinese policymaking containing regional and long-term development plans and targeted
policy initiatives
The plan is subject to constant review and revision over the course of the
five-year cycle
GDP growth usually exceeds the official target
GDP YOY
Growth
Real GDP growth
and targets
15%
14%
13%
12%
11.2%
11%
10%
9%
8%
7%
Average growth rate during
9th Five-Year Plan period :
8.6%
Average growth rate during
10th Five-Year Plan period :
Average growth rate during
11th Five-Year Plan period
9.8%
Average growth rate during
12th Five-Year Plan period
Target: 8%
Target: 7%
Target: 7.5%
Target: 7%
6%
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
GDP growth target lowered from 7.5% to 7.0% in the 12th Five-Year Plan
This reflects an emphasis on “higher quality growth”
China consistently exceeds the official growth targets
11th Five-Year Plan (2006-2010)
Most targets achieved or exceeded
Key economic targets in the 11th Five-Year Plan
Target
Actual
7.5
11.2
<5
4.1
43.5
35.4
2
around 20
43
34.9
1.8
19.1
Urbanization rate (% )
47
47.5
Urban pension system coverage (mn persons)
220
260
>5
>5
9.7
8.9
Item
Macro economy
GDP growth (%, real)
Unemployment rate (%)
Economic structure
Service sector share of GDP (%)
Service sector share of total employment (%)
R&D spending as a share of GDP (%)
Decline in energy consumption per unit GDP (%)
Living standards
Urban disposable income per capita growth (%)
Rural net income per capita growth (%)
China’s 12th FYP is the national blueprint to achieve mediumterm economic, social and environmental objectives
China’s 12th FYP builds in sustainability
China’s 12th FYP marries environmental and energy
challenges with huge economic opportunities
Five key themes in the 12th
Five-Year Plan
Important features of the 12th Five-Year Plan
Chinese government determined to de-emphasize quantitative
growth and focus on the quality of economic growth
Plan provides for increased expenditures for education and
healthcare, especially in rural areas, environmental protection,
and air and water pollution control
Transformation of the Chinese economic growth model

From export-oriented to domestic demand-oriented

From input-driven to innovation-driven
Five key themes in the 12th Five-Year Plan
I.
Adjust growth model
II.
Enhance innovation and upgrade economic structure
III.
Speed up growth in inland provinces
IV.
Improve living standards
V.
Strengthen environmental protection
I. Adjust the growth model – boosting the role of
services
% share of GDP
60%
50%
Secondary sector
40%
30%
Tertiary sector
20%
10%
0%
1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Source: National Bureau of Statistics
Services (tertiary sector) share of GDP has increased by 2.1 percentage points over the
past five years to 43.0% in 2010
The new target is to increase services’ GDP contribution by 4 percentage points to 47%
in 2015
This will require services to grow more quickly than manufacturing, especially high-value
services areas such as finance and business services
I. Adjust the growth model – global rebalancing
entails switch to domestic-led growth
％
Source: National Bureau of Statistics
In 2009, China successfully deployed an aggressive stimulus, including
infrastructure investment, to cushion the economy from the impact of the global
financial crisis
China now aims to rebalance the economy and ensure that growth is based on
a broad mix of consumer spending, investment and exports
II. Enhance innovation
China aims to develop higher value-added products and services, while
moving away from excessive dependence on low-wage manufacturing
Innovation is a key plank of this strategy, and two targets explicitly relate to
innovation

R&D spending to increase to US$177bn (2.2% of GDP) in 2015 from
US$106bn (1.8% of GDP) in 2010*

Number of new invention patents to double from 228,00 to nearly 459,000 by
2015**
While some international companies view ‘indigenous innovation’ policies as
protectionist, many others have invested in China R&D centers or taken part in
venture capital/private equity investments
•*Estimates based on GDP forecasts from the IMF World Economic Outlook April 2011 database
•**Target is to increase from 1.7 new invention patent per 10,000 population in 2010 to 3.3 patents per 10,000 population in
2015, while total population is targeted to rise from 1.34bn to (no more than) 1.39bn in 2015
III. Speed up growth in inland provinces
Central and Western China are
entering a take-off growth period
Huge infrastructure investment,
including a 7,531 km high-speed
rail network to date, is
connecting inland provinces to the
national market
Strategic designation of Chongqing Liangjiang New Area as a new development
zone (similar to Shanghai Pudong) will help create a West China economic hub on
the western stretch of the Yangtze river
Preferential policies in Central and Western China for foreign investors are
expected, especially in favored industries
IV. Improve living standards – ensuring ordinary
people enjoy the fruits of growth
GDP and Per Capita Disposable Income
GDP
Average Per Capita Disposable Income
16%
14%
10.3%
12%
10%
7.8%
8%
6%
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Source: National Bureau of Statistics
Concerns about widening income inequality - targeting per capita income growth
of at least 7% a year for both urban and rural residents in 2011-2015
36mn units of social housing to be built over the next five years, covering about
one-fifth of the urban population, according to Premier Wen Jiabao
Additional targets for healthcare coverage, pension system coverage and
employment
V. Environmental protection becomes a major
priority area
Greenest five-year plan in China’s history
•
One-third of the plan’s targets relate to resources and the environment
•
7 of the 8 targets are mandatory, a higher proportion than in the other areas
Key resource and environmental targets in 12th Five-Year Plan
Item
2010
2015 Target
Total agricultural land (mn commercial acre)
Reduce water consumption per unit of industrial added value (%)
Efficiency index for use of water in agriculture
Non-fossil energy as a share of primary energy consumption (%)
Energy consumption reduction per unit of industrial added value(%)
Carbon dioxide emission reduction per unit of GDP (%)
Carbon dioxide
Reduction of pollutants emission Sulfur dioxide
volume (%)
Ammonium nitrogen
Nitrogen oxide
Forest coverage (%)
Forestry
Total forest volume (mn cubic
yards)
362
362
0.5
8.3
0.53
11.4
Target type
Resources and environment
20.4
21.7
[0]
[30]
[0.03]
[3.1]
[16]
[17]
[8]
[8]
[10]
[10]
[1.3]
17.8
18.6
[6]
Mandatory targets are ones to which the government accords absolute priority
Mandatory
Mandatory
Non-mandatory
Mandatory
Mandatory
Mandatory
Mandatory
Mandatory
Key targets in the 12th Five-Year Plan
Selection from a total of 24 quantitative targets
Key economic targets in 12th Five-Year Plan
Item
Economic development (3 items)
GDP (RMB trn)
Service sector share of GDP (%)
Urbanization rate (%)
Science, technology and education (4 items)
R&D spending as share of GDP (%)
Invention patents per 10,000 people
Resources and the environment (8 items)
Reduction of energy consumption per unit GDP (%)
Reduction of carbon dioxide emissions per unit GDP (%)
Living conditions
2010
2015
Annual
Growth
Rate (%)
39.8
43
47.5
55.8
47
51.5
7
[4]
[4]
Non-mandatory
Non-mandatory
Non-mandatory
1.8
1.7
2.2
3.3
[0.4]
[1.6]
Mandatory
Mandatory
[16]
[17]
Mandatory
Mandatory
Target type
Urban disposable per capita income (RMB)
19,109
26,810
>7
Non-mandatory
Rural net per capita income (RMB)
Construction of social housing (mn units)
5,919
8,310
>7
[36]
Non-mandatory
Mandatory
Mandatory targets are ones to which the government accords absolute priority
Tapping China’s market opportunity
Urbanization on an epic scale creates consumer
demand
Chinese
urbanization rate
中国城镇化率
％
55
51.5
50
45
40
36.2
37.7
39.1
40.5
41.8
43.0
43.9
44.9
45.7
2007
2008
46.6
47.5
35
30.5
30
25
20
1996
2000
2001
2002
2003
2004
2005
2006
2009
2010
2015
Source: National Bureau of Statistics and 12th Five-Year Plan
China’s urban population will increase by 12mn-16mn every year
This will create huge demand for urban housing, shopping, workplaces,
transport, education, healthcare and other civic amenities
Growth sectors under China’s rebalancing
While some industrial sectors are in overcapacity, huge swaths of economic
activity and employment are virtually missing from the Chinese marketplace.
Healthcare: China has 1.6 doctors per thousand people; the US has more
than 23. Reaching the US ratio would mean adding almost 30mn doctors
and other healthcare professionals
Manufacturing White Collar: China's manufacturers are focusing more on
R&D, quality control, brand management, financial planning, environmentalhealth safety. China would need 60 million more white-collar workers to
be comparable with the US on this score, or 30mn if we adjust for relative
development levels.
Education: China has 10 teachers per thousand people, as opposed to 22
in the US. China needs another 16mn teachers to reach the US ratio in the
US.*
* Source: Daniel H. Rosen is the principal of Rhodium Group, an advisory firm focusing on China, and is also a visiting fellow with the Peterson
Institute for International Economics and an adjunct associate professor at Columbia University.
Opportunities in seven emerging strategic
industries
Value-added output of seven emerging strategic industries to grow to
account for 8% of GDP by 2015, according to the official highlights of the
draft plan distributed prior to the National People’s Congress in March 2011
Under the 2011 Foreign Direct Investment Industry Guidelines,
‘encouraged’ sectors for foreign investment include high-tech, clean
energy, aerospace and aviation, new materials, high-end
manufacturing, advanced logistics, vocation and training
Long-term plan for new-energy vehicle industry
• Electric car
prototype developed
by Shanghai
Automotive Industry
Corp Motor
• Due to be launched
in October 2012
Source: China Daily
The State Council is reviewing a US$15.3bn development plan for
the new-energy vehicle industry
Goal of becoming a leader in the new-energy vehicle sector over the
next 10 years
Targeting sales volumes of 5mn units by 2020
Opportunities in next-generation IT
China has 50% more internet users (475mn) than the entire US population
and is forecast to reach 750mn by 2015 (McKinsey)
Government plans to invest in R&D of the "Internet of things" and cloud
computing, and develop digital and virtual technologies.
Silicon Valley Bank and EMC Corp come to the
Knowledge and Innovation Community in Shanghai
Silicon Valley Bank
EMC Corporation
KIC Vision and Mission
…weaving together the resources of universities and research institutions nearby,
domestic and international high-tech corporations, venture capital firms and
government services to create a world class knowledge and commercialization
center for high added value sectors such as Creative Media, Life Science and
Cleantech.
KIC / Knowledge Community Developments (KCD) as
a part of China’s push towards innovation
Innovation – a supportive environment for creativity
Education System – a bridge between international, local universities and
industry to share best practices and latest research
Entrepreneurial Culture – business model encourages entrepreneurship
IPR – a catalyst in addressing and debating IPR issues
Financial – investor platforms for angels, PE and VC’s
Environment – a model example of an environmentally friendly community:
green “LEED” certified buildings and ample green space
Real Estate – an innovative mixed-use master planned community helping
shape China’s built environment.
LOCATIONS
Russia
Mongolia
Japan
N. Korea
DALIAN
BEIJING
S. Korea
Beijing
Shanghai
CHINA
CHENGDU
NANJING
KUNSHAN
WUHAN
SHANGHAI
Nepal
Taiwan
India
SHENZHEN
Myanmar
Hong Kong
Australian firms in China post impressive results
and are optimistic about the market outlook
AmCham Shanghai Survey of Business Performance in China
AusCham
Survey of Business Performance in China 2010
% of respondents
answering
affirmatively
100
90
80
70
60
50
40
30
20
10
0
87
79
77
70
65
61
52
47
40
Revenue growth
Profitable
2008
2009
2010
Gained market share
AustCham Shanghai's survey of business performance in China shows Australian
companies' revenue, profitability and market share shot up in 2010
Optimism regarding the China market continued in 2010, despite concerns over the
regulatory environment favoring local enterprises
 China is the No.1 priority for 20% of Australian companies
 About nine out of 10 Australian companies in China forecast a revenue increase for 2011
 The percentage of companies expecting to increase investment in China by more than 15% more
than doubled in 2010
Source: AustCham-Shanghai website, January 20, 2011
Thank You
[email protected]
___
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