China’s 14th Five-Year Plan: A First Look

China’s 14th Five-Year Plan: A First Look

Updated January 5, 2021
China’s 14th Five-Year Plan: A First Look
The Communist Party of China (CPC)’s 19th Central
Details to date about national, regional, and industry plans
Committee—a body of China’s 376 top Party officials—
emphasize China’s national economic security—including
held its 5th Plenum in late October 2020 to deliberate on
national economic, industrial, and technology development
China’s 14th Five-Year Plan (FYP) for 2021-2025 and
goals and economic competitiveness—and “properly
economic goals out to 2035. China’s annual Central
handling the relationship between openness and
Economic Work Conference reviewed the plans in
independence.” China’s leaders seek to secure supply
December ahead of the scheduled ratification of final
chains and boost self-sufficiency in agriculture, energy,
versions at the annual session of China’s legislature in
technology, and industry. In a speech to the Party’s Central
March 2021. Initial details suggest that Chinese leaders
Economic and Financial Working Group in April 2020,
plan to expand the state’s role in the economy and advance
President Xi called for building “independent, controllable,
national economic security interests; use market restrictions
secure, and reliable supply chains to ensure industrial and
and its One Belt, One Road global networks to foster
national security with access to at least one alternative
Chinese-controlled supply chains; and sharpen the use of
source for important products.” President Xi said China
antitrust, intellectual property (IP), and standards tools to
should “use existing global dependencies on China as a
advance industrial policies. To develop strategic
counterweight to pressures to shift manufacturing out of
technologies prioritized in its plans, China is prioritizing
China” and “use the pull of China’s market to attract global
efforts to obtain foreign technology through global
resources and deepen global dependence on China.” Xi also
pathways that are not yet restricted, such as partnerships in
called for developing and leveraging control of “core
open technology and basic research, the establishment of
technologies”—in sectors such as high speed rail,
research and development (R&D) centers overseas, and
telecommunications and power equipment, and new
talent programs for foreign experts to work in China. Plans
energy—and localizing technology and critical production
for new market openings are limited to trade zones and
in China, including through import substitution. One Belt,
areas where China seeks foreign expertise (emerging
One Road is often cited as a network to facilitate secure
technologies and education) and capital (financial services).
trade and gain initial global footholds in MIC2025 sectors.
To counter offshoring pressures, for example, Hainan
Dual Circulation and Secure Supply Chains
Province is reviving trade zone incentives for
China faces widening and deepening trade tensions, foreign
manufacturing that processes imported inputs for re-export
pressures on businesses to move some production out of
(e.g., duty free import of raw materials, components, and
China, foreign government restrictions on technology
equipment) and air and shipping logistics. China is also
transfer to China, and global scrutiny of Chinese overseas
looking to other priorities, including:
commercial activity. There is also broad international
Agriculture. The government is drafting a food security
skepticism about China’s commitment to market opening
plan, making provincial governors responsible for grain
and global trade rules and norms. Chinese President Xi
security measures, increasing domestic capabilities, and
Jinping is reviving a “dual circulation” economic policy
diversifying sources for agricultural imports. China is
that his predecessor used during the 2009 financial crisis
focusing on seed technology and plans to introduce new
and the “supply side” reforms that Xi introduced in 2015 to
strains with higher yields (a potential nod to biotech now
upgrade industry and launch Made in China 2025 (MIC
that China owns Syngenta), and boost production of high
2025) industrial policies. Dual circulation refers to
quality grains and soy. Diversification arguably is affecting
leveraging the dual forces of domestic and global demand
China’s shortfalls in meeting purchase targets set by the
by developing domestic capacity while pursuing openings
January 2020 U.S.-China trade agreement.
in global markets. The policy aims to boost both domestic
supply and demand in response to what Chinese leaders
Technology. China is developing strategic technologies and
describe as a complex, unstable, and uncertain global
digital infrastructure (including a cryptocurrency), and aims
environment. The approach is not a simple turn inward, but
to advance its digital infrastructure and domestic rules
rather seeks to transfer and localize foreign capabilities in
globally. China’s stimulus committed $1.4 trillion over five
China and maintain access to global markets wherever
years for digital infrastructure, including 5G, smart cities,
possible—including for key inputs, technology, and
and Internet of Things applications for manufacturing. U.S.
exports—to develop China’s capabilities. Dual circulation
business has expressed concerns that (i) these sectors are
appears to have intensified China’s non-reciprocal approach
already restricted, and (ii) procurement in areas such as
to trade whereby its market has become increasingly
cloud computing could favor Chinese firms and require
restrictive while Chinese firms expand overseas. In 2009,
technology disclosure and data localization.
when global industry contracted, China subsidized
production in 13 sectors, funding domestic purchases of
Finance. China is developing a central bank digital
these products and exporting excess capacity, a precursor to
currency to try to influence global finance and e-commerce,
China’s One Belt, One Road initiative.
and to diversify from U.S. dollar financing. The city of
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China’s 14th Five-Year Plan: A First Look
Shenzhen and Hainan Province are to pilot cross-border
State Control and Financing
cryptocurrency trade and cash pooling of foreign exchange
and China’s currency, the renminbi. The zones are also
In September 2020, the CPC Central Committee cal ed for
promoting financial services investment; the securitization
strengthening Party control of the private sector to “build a backbone
and trading of data, energy, IP, and real estate assets; and
of private economic actors that are reliable and useful at critical
cross-border financing for Chinese technology firms.
moments.” President Xi has cal ed state firms an important pil ar for
the Party to govern and rejuvenate China, saying they must be
Environmental Technologies. China’s pledge to peak CO2
stronger, better, and bigger. State funding continues to underpin
emissions by 2030 relies on MIC 2025 goals in power and
priority sectors. The funding is chal enging to track through a complex
new energy technologies and materials, such as batteries.
web of onshore and offshore corporate and financial vehicles,
Plans call for half of vehicles to be electric or fuel-cell
powered, and the other half hybrid by 2035. China’s
including government guidance funds; local government, insurance,
and asset management companies; venture capital and private equity;
environmental and technology goals are mutually
corporate bonds; and stock listings.
reinforcing; the 14th FYP environmental policies could
bolster China’s efforts to upgrade manufacturing and
require foreign technology transfer to meet new standards.
Standards, Antitrust and IP Tools
China is mid-stream in advancing priorities set in the 2006
“Indigenous” Innovation and Basic Research
MLP and the 13th FYP. New plans will likely continue to
Chinese leaders arguably are emphasizing technology
advance sectors and projects prioritized in these plans and
independence and indigenous innovation—longstanding
MIC 2025—including aerospace, artificial intelligence,
themes in China’s industrial policies—while prioritizing
biotechnology, information technology, semiconductors,
China’s ability to continue to access foreign technology and
quantum computing, robotics, advanced machinery and rail,
global markets. The 5th Plenum Communique reinforces
deep sea technologies, and new materials. China will likely
innovation as the core driver of China’s development, a
introduce new projects and areas of emphasis, as well as
direction set in 2006 with China’s Medium and Long Term
policies to advance its next stage of development in these
Plan for Science and Technology (MLP) and the 13th FYP.
areas, including commercialization, standardization,
These plans called for developing indigenous capabilities,
financing, and export promotion. New plans emphasize
decreasing dependence on foreign technology, and
standards development, and antitrust and IPR enforcement
advancing emerging technologies. This process of
to advance industrial policies. These tools were used during
“indigenous” innovation involves the introduction,
China’s 12th and 13th FYPs to require foreign technology
absorption, and adaptation of foreign technology that is
and IP licensing, joint ventures, and divestitures to Chinese
rebranded as indigenous Chinese capabilities. The Party’s
state firms. In 2018, China consolidated market
emphasis on developing domestic innovation capabilities
competition, IP, and standards authorities in a powerful new
has underpinned aspects of China’s industrial policies of
regulator—the State Administration for Market Regulation
concern to Congress, such as forced technology transfer,
(SAMR)—that is poised to play a key role in implementing
industrial subsidies, state-financed acquisitions of foreign
the 14th FYP. Since then, China’s Academy of Engineering
firms in strategic sectors, cyber intrusions, and IP theft.
and SAMR have been developing China Standards 2035, a
plan to set standards to advance Chinese industrial goals
The Chinese city Shenzhen is piloting 14th FYP innovation
and create interoperable civilian and military standards,
priorities that include a focus on foreign partnerships and
raising questions about the dual use nature of Chinese
overseas centers for basic research. China’s talent plan
overseas infrastructure. China’s standards setting may focus
incentives include visas and permits to facilitate frequent
on new technologies where China is likely to have greater
cross-border travel, work, and permanent residence of
influence in the absence of existing rules.
foreign experts in China. Reforms seek to commercialize
Issues for Congress
research, transfer government patent rights to innovators,
In response to China’s plans to further lean on state-led
and revitalize national labs. China is looking to securitize IP
development, Congress might:
and develop digital IP rights to foster the trade of IP. China

is targeting foreign collaboration in basic research, open
examine China’s complex structuring of government industrial
technology, and overseas research centers to leverage areas
subsidies that make it difficult to determine the state’s role and
that may fall outside current application of export controls
subsidization under global rules;
and remain open for U.S. cooperation. These ties allow
 respond to China’s unconventional use of antitrust, IP, and
China to develop capabilities in priority areas, such as
standards tools, including potentially sharpening U.S.
semiconductor design. Many countries’ export controls
authorities and strengthening the U.S. role in global technical
focus on applied (but not basic) research and technology
bodies to counter China’s policies;
transfer across national borders. China’s new
 examine the implications of China’s access to U.S. open
semiconductor policies encourage foreign academic and
source technology and basic research and whether export
industry collaboration and Chinese corporate R&D centers
controls should be tightened; and
overseas. In June 2020, Chinese firms Huawei and San’an
 consider how trade policy might enhance supply chain security
Optoelectronics announced a $1.2 billion R&D center in the
and trade and technology collaboration among U.S. allies and
United Kingdom to develop semiconductor chips. Many top
partners.
Chinese technology firms—including Alibaba, Baidu, and
Tencent—have U.S. R&D centers.
Karen M. Sutter, Specialist in Asian Trade and Finance
Michael D. Sutherland, Analyst in International Trade and
Finance
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China’s 14th Five-Year Plan: A First Look

IF11684

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