New Five Year Plan

Beijing can't predict the future, but China's five-year plan is good for the country. It gives China's booming economy a framework.

But it's not the sort of thing dreamt up overnight. Which is why Premier Li Keqiang made sure there was plenty of time to discuss it before he fired the starting pistol for the 13th five-year plan last autumn, even though it won't launch until spring 2016.

It was worth the trouble. Unlike a coalition agreement devised by a democratically elected government, likely to be full of tricks and tactical evasions, Beijing has plenty of scope to come up with a long-term strategy that is more about logistics than ideology and which will, by and large, be implemented.

Details of the new plan are already emerging. Environmental protection is to be prioritized, as are the renewable and nuclear energy sectors, increasing their share of the total energy market fivefold, with the ultimate goal of phasing out coal. First, however, China needs to start investing even more than it already is.

Last year Beijing spent $89.5 billion (77.2 billiion euros) on clean energy - almost 30 percent of global investment in the sector. Even more companies are set to be privatized, especially in the state banking sector. The first private bank - which also happens to be online-only - opened two weeks ago, and four further licenses have already been awarded.

Per capita income set to rise rapidly

China's evolving demographics are another urgent factor. The country's birth laws are to be relaxed, although Beijing will be unable to do much about China's rapidly ageing population. It needs to think of ways to improve the social security system, for a start.

But the cornerstone of the new five-year plan is Beijing's resolution to boost per capital income. By 2020, China hopes to have become a high income country. This would make it the 77th country to meet the criterion: an average per capita income of over $12,000 per year.

In other words, double what it is now. For the time being, Chinese earn an average $6,800 per year. With a population of 1.3 billion, this would be an astonishing jump, considering the figures that will have to be generated.

It wouldn't be the first time that Beijing set itself ambitious targets and managed to meet them. But the obstacles get ever higher. If China hits its goal, it will have increased the per capita income threefold in 10 years. In 2010, when the current five- year plan was launched, the average annual per capital income was just $4,000.

The challenge of inflation

But the important thing in all of this is that if Beijing really wants to create a moderate, affluent society, then the government has to ensure that people can hang on to a good proportion of their rising incomes. Until now, the cost of food, and above all, rent, has risen along with wages. Growth depends on people consuming more. And this will only happen if they are able to put less aside for possible medical emergencies. Far too often an operation can destroy a family's entire wealth.

It will be interesting to see what effect higher per capita incomes in China will have on its role in the world. Post purchasing power adjustments, China is now the world's biggest economy and a political heavyweight on the global stage. How powerful will it be when it attains per capita income at the US level?

At the moment this is $53,000 per annum. It will take two or three, perhaps four, five-year plans for China to reach the super league with the big players. That's not so long - that is, if the environment holds out.

DW columnist Frank Sieren has lived in Beijing for 20 years.