China’s Next Agenda

CAMBRIDGE – I recently returned from Beijing, where I had spent a week talking with Chinese officials and attending the China Development Forum (CDF), the major annual gathering of Chinese and senior foreign officials and top business executives. The Chinese government had just released its 13th Five-Year Plan, and officials were eager to explain what it means for China’s future.

Although the latest plan contains a seemingly endless list of specific projects and goals, the major new theme this year is “supply-side restructuring,” a term that includes a wide range of policies aimed at boosting economic growth and living standards. The term “supply side” is intended to distinguish these new policies from the traditional demand-side measures of easy money and a slightly larger fiscal deficit that are already aimed at strengthening economic activity.

High on the list of supply-side policies is eliminating some of the excess capacity of state-owned firms in the steel and coal industries. This means shedding some four million workers, a number equal to about 0.5% of China’s workforce. The plan authorizes a special fund to provide assistance to those who remain unemployed. Experts believe that much more downsizing is needed; but the authorities are starting small to see how it works and to monitor the public’s response.

China will also be shifting millions of people from low-productivity agricultural areas to dozens of new cities, accompanied by ambitious plans to build 50 new airports and thousands of miles of new roads and railroads. The authorities also tout the One Belt, One Road project, which will use Chinese financial assistance and resources to develop ports, railroads, and highways linking China with other parts of Asia, central Asia, and potentially even Europe. The foreign-policy goal is to expand Chinese influence in the region and beyond. It will also provide an opportunity to export some of China’s excess industrial capacity.