November 12, 2020
China’s 14th Five-Year Plan: A First Look
The Communist Party of China (CPC)’s 19th Central
including national economic, industrial, and technology
Committee—a body of China’s 376 top Party officials—
development goals and economic competitiveness—and
held its 5th Plenum in late October 2020 to deliberate on
“properly handling the relationship between openness and
China’s 14th Five-Year Plan (FYP) for 2021-2025 and
independence.” Chinese leaders seek to secure China’s
economic goals out to 2035. China’s annual Central
supply chains and boost self-sufficiency in agriculture,
Economic Work Conference is to review the plans in
energy, technology, and industry. In a speech to the Party’s
December before they are unveiled at the annual session of
Central Economic and Financial Working Group in April
China’s legislature in March 2021. Initial details suggest
2020, President Xi called for building “independent,
that Chinese leaders plan to expand the state’s role in the
controllable, secure, and reliable supply chains to ensure
economy and advance national economic security interests;
industrial and national security with access to at least one
use market restrictions and its One Belt, One Road global
alternative source for important products.” President Xi said
networks to foster Chinese-controlled supply chains; and
China should “use existing global dependencies on China as
sharpen the use of antitrust, intellectual property (IP), and
a counterweight to pressures to shift manufacturing out of
standards tools to advance industrial policies. To develop
China” and “use the pull of China’s market to attract global
capabilities prioritized in its plans, China is repositioning to
resources and deepen global dependence on China.” Xi also
obtain foreign technology through partnerships in open
called for developing and leveraging control of “core
technology and basic research, and to establish research and
technologies”—in sectors such as high speed rail,
development (R&D) centers overseas, and talent programs
telecommunications and power equipment, and new
for foreign experts to work in China. Plans for new market
energy—and localizing technology and critical production
openings are limited to zones and focus on areas where
in China, including through import substitution. One Belt,
China seeks foreign expertise (emerging technologies and
One Road is often cited as a network to facilitate secure
education) and capital (financial services).
trade and gain initial global footholds in MIC2025 sectors.
To counter offshoring pressures, Hainan Province is
Dual Circulation and Secure Supply Chains
reviving incentives for manufacturing that processes
China faces widening and deepening trade tensions, foreign
imported inputs for re-export (e.g., duty free import of raw
pressures on businesses to move some production out of
materials, components, and equipment) and air and
China, foreign government restrictions on technology
shipping logistics. China is also looking to other priorities:
transfer to China, global scrutiny of Chinese overseas
commercial activity, and international skepticism about
Agriculture: The government is drafting a food security
China’s commitment to market opening and global trade
plan, has made provincial governors responsible for grain
rules. Chinese President Xi Jinping is reviving a “dual
security measures, increasing domestic capabilities, and
circulation” economic policy that his predecessor used
diversifying sources for agricultural imports. China plans to
during the 2009 financial crisis and the “supply side”
introduce new strains with higher yields (a potential nod to
reforms that Xi used in 2015 to upgrade industry and launch
biotech now that China owns Syngenta), and boost
Made in China 2025 (MIC 2025) industrial policies. Dual
production of high quality grains and soy. Diversification is
circulation refers to leveraging the dual forces of domestic
affecting China’s shortfalls in meeting purchase targets set
and global demand by developing domestic capacity while
by the January 2020 U.S.-China trade agreement.
pursuing openings in global markets. The policy aims to
boost both domestic supply and demand in response to what
Technology: China is focused on developing the digital
Chinese leaders describe as a complex, unstable, and
economy and cryptocurrency and digital trade rules that it
uncertain global environment. The approach is not a simple
aims to push globally. China’s stimulus committed $1.4
turn inward, but rather seeks to transfer and localize foreign
trillion over five years for digital infrastructure, including
capabilities in China and maintain access to global markets
5G, smart cities, and Internet of Things applications for
wherever possible—including for key inputs, technology,
manufacturing. U.S. business has expressed concerns that
and exports—to develop China’s capabilities. Dual
(i) these sectors are already restricted, and (ii) procurement
circulation appears to have intensified China’s non-
in areas such as cloud computing could favor Chinese firms
reciprocal approach to trade whereby its market has become
and require technology disclosure and data localization.
increasingly restrictive while Chinese firms expand
overseas. In 2009, when global industry contracted, China
Finance: China is developing a central bank digital
subsidized production in 13 sectors, funding domestic
currency to try to influence global finance and ecommerce,
purchases of these products and exporting excess capacity,
and to diversify from U.S. dollar financing. The Chinese
a precursor to China’s One Belt, One Road initiative.
city Shenzhen and Hainan Province are to pilot cross-border
cryptocurrency trade and cash pooling of foreign exchange
Details to date about national, regional, and industry plans
and China’s currency, the renminbi. The zones are also
emphasize ensuring China’s national economic security—
promoting financial services investment; the securitization
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China’s 14th Five-Year Plan: A First Look
and trading of data, energy, IP, and real estate assets; and
cross-border financing for Chinese technology firms.
In September 2020, the CPC Central Committee called for
strengthening Party control of the private sector to “build a
Environmental Technologies: China’s pledge to peak CO
backbone of private economic actors that are reliable and
2
emissions by 2030 relies on MIC 2025 goals in power, and
useful at critical moments.” President Xi has called state firms
new energy technologies and materials, such as batteries.
an important pil ar for the Party to govern and rejuvenate
Plans call for half of vehicles to be electric or fuel-cell
China, saying they must be stronger, better, and bigger. State
powered, and the other half hybrid by 2035. China’s
funding continues to underpin priority sectors. The funding is
environmental and technology goals are mutually
challenging to track through a complex web of onshore and
reinforcing; 14th FYP environmental policies could bolster
offshore corporate and financial vehicles, including
China’s efforts to upgrade manufacturing and require
government guidance funds; local government, insurance, and
foreign technology transfer to meet new standards.
asset management companies; venture capital and private
equity; corporate bonds; and stock listings.
“Indigenous” Innovation and Basic Research
Chinese leaders arguably are emphasizing technology
Standards, Antitrust and IP Tools
independence and indigenous innovation—long-standing
China is midstream in advancing priorities set in the 2006
themes in China’s industrial policies—while prioritizing
MLP and the 13th FYP. New plans will likely continue to
China’s ability to continue to access foreign technology and
advance sectors and projects prioritized in these plans and
global markets. The 5th Plenum Communique reinforces
MIC 2025—including aerospace, artificial intelligence,
innovation as the core driver of China’s development, a
biotechnology, information technology, semiconductors,
direction set in 2006 with China’s Medium and Long Term
quantum computing, robotics, advanced machinery and rail,
Plan for Science and Technology (MLP) and the 13th FYP.
deep sea technologies, and new materials. China will likely
These plans called for developing indigenous capabilities,
introduce new projects and areas of emphasis, as well as
decreasing dependence on foreign technology, and
policies to advance its next stage of development in these
advancing emerging technologies. This process of
areas, including commercialization, standardization,
“indigenous” innovation involves the introduction,
financing, and export promotion. New plans emphasize
absorption, and adaptation of foreign technology that is
standards development, and antitrust and IPR enforcement
rebranded as indigenous Chinese capabilities. The Party’s
to advance industrial policies. These tools were used during
emphasis on developing domestic innovation capabilities
China’s 12th and 13th FYPs to require foreign technology
has underpinned aspects of China’s industrial policies of
and IP licensing, joint ventures, and divestitures to Chinese
concern to the U.S. Congress, such as forced technology
state firms. In 2018, China consolidated market
transfer, industrial subsidies, state-financed acquisitions of
competition, IP, and standards authorities in a powerful new
foreign firms in strategic sectors, cyber intrusions, and other
regulator—the State Administration for Market Regulation
forms of IP theft.
(SAMR)—that is poised to play a key role in implementing
the 14th FYP. Since then, China’s Academy of Engineering
The Chinese city Shenzhen is piloting 14th FYP innovation
and SAMR have been developing China Standards 2035, a
priorities that include a focus on foreign partnerships and
plan to set standards in ways that advance Chinese
overseas centers for basic research. China’s talent plan
industrial goals and create interoperable civilian and
incentives include visas and permits to facilitate frequent
military standards, raising questions about the dual use
cross-border travel, work, and permanent residence of
nature of Chinese overseas infrastructure. China’s standards
foreign experts in China. Reforms seek to commercialize
setting may focus on new technologies where China may
research, transfer government patent rights to innovators,
have greater influence in the absence of existing rules.
and revitalize national labs. China is looking to securitize IP
Issues for Congress
and develop digital IP rights to foster the trade of
In response to China’s plans to further lean on state-led
intellectual property. China is targeting foreign
development, Congress might:
collaboration in basic research, open technology, and
overseas research centers to try to skirt export controls and
address China’s complex structuring of government industrial
leverage areas that remain open for U.S. cooperation. These
subsidies that make it difficult to determine the state’s role and
ties are allowing China to develop capabilities in priority
subsidization under global rules;
areas, such as semiconductor design. Many countries’
respond to China’s unconventional use of antitrust, IP, and
export controls focus on applied research and technology
standards tools, including potentially sharpening U.S.
transfer across national borders. China’s new
authorities and strengthening the U.S. role in global technical
semiconductor policies encourage foreign academic and
bodies to counter China’s policies;
industry collaboration and Chinese corporate R&D centers
constrain China’s access to U.S. open source technology and
overseas. In June 2020, Chinese firms Huawei and San’an
basic research and tighten export control gaps; and
Optoelectronics announced a $1.2 billion R&D center in the
use trade policy to facilitate supply chain security and trade
United Kingdom to develop semiconductor chips. Many top
and technology collaboration among allies and partners.
Chinese technology firms—including Alibaba, Baidu, and
Tencent—have U.S. R&D centers.
Karen M. Sutter, Specialist in Asian Trade and Finance
State Control and Financing
Michael D. Sutherland, Analyst in International Trade and
Finance
IF11684
https://crsreports.congress.gov
China’s 14th Five-Year Plan: A First Look
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