While in some countries a 3rd wave of COVID-19 is looming ahead, the roughly 3,000 delegates of China’s parliament, the National People’s Congress (NPC), convene in Beijing from March 5th, though, under strict pandemic control measures.

China seems to have emerged from the pandemic successfully, displaying one of the lowest death rates and the highest growth rate for 2020 worldwide. This – together with a decent weather forecast – sets the perfect stage for the NPC’s annual session.

What is China’s National People’s Congress

The National People’s Congress (NPC) is the national legislature of the People’s Republic of China and convenes once a year for its annual session for about one week in Beijing. Its role is not comparable to that of parliaments in democratic countries, though, since it is “subject to […] directives and control”  by the Chinese Communist Party (CCP).

The NPC’s roughly 3,000 delegates are elected indirectly by local People’s congresses and the CCP has a strong say in their composition. Moreover, most of the decision-making has already taken place in advance.

Why does China’s National People’s Congress matter

This year, the NPC will deliberate and finally launch the 14th Five-Year-Plan for National Economic and Social Development (2021-2025) alongside the Long-range Objectives through 2035, the outline of which was proposed by the 5th plenum of the 19th Central Committee of the CCP in October 2020.

China’s Five-Year-Plans give important insights into China’s development strategy and its foci. We should therefore take a close look at what’s happening in Beijing during the next week in order to gain a more detailed understanding on the path towards which the world’s quickly rising economic superpower will be headed in the next few years.

In my opinion, there are three topics from the upcoming Five-Year-Plan in regard to China’s economic relations with the outside world that deserve our special attention.

#1 China’s new stage of reform and (de-)opening: “Dual circulation”

While the newly proposed strategy of “dual ”, which refers to the linkages between internal and external economic activities, still has both a domestic and an international dimension, the focus is clear:

The “domestic big circulation” is supposed to be the centerpiece and starting point of all economic activities, while the circulation between the domestic and the international economy serves as a complement.

The vast internal market should be fully exploited as a comparative advantage to attract the production factors as China needs them. It becomes very clear that the Chinese government wants to minimize the country’s reliance on foreign capital, know-how and demand in its future development.

While past Five-Year-Plans may also have hinted at some of these aspects, it appears that the Chinese government is serious about shifting the focus of the economy inwards this time, as shown by the language and the framing of “dual circulation” as a “new development pattern” in the draft plan.

Renowned China expert, Minxin Pei, has even called this approach a “decisive reversal of China’s ‘opening’ to the outside world” . It will be interesting to see what the full text of the plan will say in detail about this new pattern.

#2 Innovation and technological self-reliance in 8 key sectors

As the international climate has become markedly tougher for China, especially due to the growing tensions with the United States, the Chinese government is determined to make an even greater effort to push indigenous innovation and reduce dependence on foreign technology in the years to come.

“Technological self-reliance and self-improvement” is therefore set as the “strategic pillar of national development”. This, of course, is also an important basis for the strategy of “dual circulation”.

In the draft version of the Five-Year-Plan, the new approach to innovation and technology is called a “whole-of-nation system”, hinting at a possible overhaul of China’s innovation system with a stronger focus on comprehensive and coordinated activities and projects on the national and local level. Also, the role of companies as the main subjects of innovation shall be strengthened.

Eight key sectors are mentioned to be at the core of these efforts:

  • artificial intelligence
  • quantum information
  • integrated circuits
  • public health
  • brain science
  • biological breeding
  • air and space technology
  • deep-earth deep-sea technology.

China is striving to be in the lead in these important technologies globally and to gain a competitive edge over western countries so that these rather depend on Chinese technology in the future and not vice-versa.

One of the measures to achieve this is to become more attractive for excellent researchers and scientists from abroad, which – given the demographic change in China and western countries – might intensify competition for talents in the mid- to long-term.

However, it remains to be seen, if China will really be able to offer the environment it takes to replace the United States as the new place-to-be for top researchers worldwide.

#3 Green development

In September 2020 Xi Jinping proclaimed the ambitious goal for China to strive for carbon neutrality by 2060. Especially given the fact that the country’s COVID19 recovery measures had a bias towards environment-intensive industries, this news came rather unexpected.

The draft of the 14th Five-Year-Plan also is rather thin on this topic, although a whole section is dedicated to “Promoting green development and fostering the harmonious coexistence of humans and nature”. A major focus is put on greening virtually all kinds of economic activities, from consumption, production, technology and innovation to lifestyle, buildings and finance.

Moreover, the promotion of green and clean technologies is also mentioned in other sections. The level of carbon emissions is to be generally reduced, so that the 2030 climate goals can be achieved .

Little is said in detail, though, about concrete policy measures and actions, how this should be done, let alone on how to achieve carbon neutrality by . Since many measures on the way will have a profound impact on China’s foreign trade and investment relations, it is worthwhile to watch out for more specifics and proposed targets that the full plan will reveal.

Meanwhile, the guidelines on a low-carbon economy recently published by the State Council give a few hints on possible foci: for example, China wants to establish a green trading system favoring high-quality green products with high value-added and discouraging exports of energy-intensive products harmful to the environment.

China has also announced to pilot an emission trading scheme for selected energy firms and plans to expand it to other sector in the future. Both measures will certainly help charting the way to carbon neutrality.

What does it mean for western policy-makers?

  • First, When China pushes ahead with its “dual circulation” strategy, especially those countries, which have relied on their economic ties with China to get through more than one economic crisis, such as Germany, should definitely be wary of this development. It would be wise for them to take the much discussed diversification of their economic relations seriously and push it forward as thoroughly and soon as possible.
  • Second, the discussion of indigenous innovation and technological self-reliance is, of course, far from new. But China has now reached a point where it is about to really walk the talk. Western countries should therefore prepare for feeling a stronger headwind coming from an increasingly innovative China. Moreover, when it comes to cooperation in science and technology, they should be aware that the ultimate goal for the Chinese side might be to make the cooperation partner dispensable in the end.
  • Third, if China wants to seriously achieve this goal by 2060, it may well need cooperation partners, e.g. when it comes to changing its heavily coal-based energy mix.

The EU could help out here and climate change mitigation supposedly is the one area of cooperation where both sides could and should be pulling in the same direction.

But even in a joint endeavour for the common good, tightening technology competition and growing geopolitical tensions will still be the elephant in the room.