China’s 13th Five-Year Plan marks a major turning point for the country's economy. After registering double-digit economic growth over the past decade, Beijing is now aiming at grow between 6.5% and 7% for the next five years.
China’s 'new normal', in the words of the country's government, involves moving away from the investment-intensive, export-oriented development model that has been instrumental in turning the country into a global economic powerhouse. Despite the success of this model, it has built up a massive overcapacity, mostly in heavy industry such as steel and coal, which is now being scaled down.
This has led China to kick off a process of more balanced, demand-driven growth to take the national economy to the next level and make China 'a moderately prosperous society in all respects' by 2020, a top priority of former president Hu Jintao's agenda. This should all but end China’s role as global outsourcing location for cheap manufacturing – indeed, the service sector is already the largest contributor to the country's GDP.
On the other hand, this new economic plan creates new opportunities for foreign investors in both the manufacturing and service sectors. This was an opinion widely held at the fourth annual China Business Conference in London on March 23. Jacopo Dettoni asked some of the conference’s speakers where the opportunities for UK and foreign investors lie in China’s age of the 'new normal'.
Stephen Phillips, chief executive, China-Britain Business Council
The 'new normal' is all about the rebalancing of the Chinese economy. Big opportunities lie in areas where the UK [is strong]. [This involves] the service sector first, which is already the largest contributor to China’s GDP. This is where the biggest opportunities lie in the medium term. [It also applies to] healthcare, life sciences, creative industries, financial and professional services, selling consumer sectors – more so in mid-consumer sectors than the luxury end of the spectrum.
It’s a shift, it’s a maturing economy where people are beginning to resemble much more consumers [in the UK] and it is also the corporate world moving away from an export-led, price-competitive model, to a much more innovation-led [model], and all this plays in the UK’s hands.
Sam Walsh, CEO, Rio Tinto
China’s planned growth of 6.5% to 7% is still very significant; it’s about $800bn [of additional GDP] every year, which is equivalent to the size of an economy such as Switzerland or the Netherlands. It means adding [to the world economy] a new G20 country each year. That’s important. More importantly for the UK is that [China wants] to move up the value chain in terms of introducing new technologies, more elaborate manufacturing and services.
I was in China recently where I met group of people who are very interested in assisting in environmental control, in relation to legal systems; the premier Li Keqiang said that education is critically important and he strongly supports student exchange. It’s a range of opportunities in relation to the type of things the UK is good at.
Jin Xu, minister counsellor of the economic and commercial counsellor's office of the Chinese Embassy in the UK
With the new Five-Year Plan, China wants to have a better quality economy based on five major guiding principles – innovation, coordination, green development, opening up and sharing. This can create a lot of opportunities for British and other foreign investors. The UK is a leading country in innovation, the country is very good at training people, [and this is a] reason why Chinese people want to come here and learn from the UK. Innovation is definitely the key sector where I see opportunities for foreign investors, but others such as healthcare and culture will also be important under this perspective.
Keith Bennett, deputy chairman, 48 Group Club
The new opportunities for foreign investors relate to many areas, but [of note are] quality of life issues, sustainable development and green development, which create possibilities both on technologies and lifestyle issues. With regard to the Belt and Road initiative, that frames a sort of coming of age for them and relates to those areas where China has got a great deal of expertise – infrastructure, construction, high-speed trains.
From the UK point of view, there will be a lot of complex, post-jurisdictional agreements to be made. I see big opportunities for British services companies in accountancy, auditing [and similar] areas.
Max Wang, vice-president, China Triumph International Engineering
A lot of hi-tech foreign companies will have more chances to invest in China. Another key area is agriculture technologies as agriculture and green towns are another important thing in China’s future development.