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Heads up: China’s 12th five year plan 2011-2016

February 1, 2011

China plans to invest US$1.5 trillion or about 5 percent of China’s gross domestic product on an annual basis in seven key industries including high-end equipment manufacturing, high-speed rail and aviation equipment, energy-saving and environmentally friendly technologies, biotechnology, new generation information technology such as telecoms and the Internet and alternative energy, advanced materials and alternative-fuel cars. With nuclear energy and high-speed rail being the flavour of the decade. The investment is part of a 2011-2016 five-year plan which needs approval the National People’s Congress, or parliament, which holds its annual full session in March. The plan to infuse the Chinese economy with high technology and innovation, strategically moving away from being known as a low cost, counterfeit nation.

“China needs to innovate if it is to compete against multinationals in the international arena,” Qiu Gang of the Beijing office of Samsung Economic Research Institute told Reuters.

According to sources, China’s state-owned enterprises will play the leading role, while private investors will be given incentives such as tax breaks and low interest bank loans, with national and local governments chipping in. Beijing is expected to unveil preferential policies later this year, possibly allowing private enterprises to use intellectual property rights as collateral to obtain loans.

HIGH SPEED RAIL
China’s high-speed rail network has been developing rapidly over the past decade, reaching a total of 8,358 km (5,182 miles), the world’s longest.

The government plans to invest up to 4 trillion yuan in high-speed rail between 2011 and 2015, according to the China Securities Journal. Inchin Closer also covered China’s new rail amitions in The new silk route’s made of steel

During Chinese President Hu Jintao’s U.S. visit in January, General Electric Co (GE.N) signed a deal to bring Chinese high-speed rail technology to the United States, and for GE to manufacture locomotives for China.

A spending spree on railways was an important part of China’s 2008-2010 stimulus package.

NUCLEAR POWER
China has lumped nuclear, solar and wind energy in one group as new, or alternative, energy.

China had just 10.8 gigawatts of nuclear power capacity at end-2010. The official nuclear target for 2020 of 40 GW is still less than 5 percent of its current installed electricity generating capacity.

However, officials said that goal is likely to be raised to 80 GW or more for 2020.

The National Development and Reform Commission, the country’s powerful economic planner, has said that the wind-power industry is already suffering from overcapacity. Solar and wind power are not expected to be given much importance in the next five year plan.

R&D INVESTMENT

Nomura International (HK) Ltd said in a research paper that the five-year plan could give boost research and development investment by over 4 trillion yuan. With a strong emphasis on moving up the value chain and innovating to improve efficiencies, China’s B&D investment is expected to rise significantly. R&D spending currently accounts for 1.5 percent of GDP in China. That figure is expected to increase to 2.0-2.5 percent over the next five years, Nomura said.

The value-added output of the seven strategic industries together account for about 2 percent of GDP now. The government has said it wants them to generate 8 percent of GDP in 2015 and 15 percent by 2020.

By pushing these sectors, China would be making a big bet that technology can help bridge the gap between limited supplies of commodities and the rapidly growing demand that has propelled it to become the world’s second-biggest economy.

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