Four Takeaways from China’s Economic Blueprint

The annual meeting of Chinas National Peoples Congress kicked off in Beijing at the beginning of March， highlighted by Premier Li Keqiangs government work report.

There are four major takeaways from Chinas economic blueprint for 2016 and beyond， as outlined in Lis work report – and what these points mean for China.

1. China cant afford for its growth to slow down any more. Li repeated the previous assertion that， to achieve its goal of doubling Chinas 2010 GDP and per capita income levels by 2020， “the economy needs to grow at an average annual rate of at least 6.5 percent” for the period covered by the 13th Five Year Plan（2016-2020）. What that means， in practice， is that Chinas economic growth cannot continue to slow. Growth has declined steadily over the past three years， dropping from 7.7 percent in 2013 to 7.4 percent in 2014 and then to 6.9 percent in 2015. This years growth target has been set at 6.5 to 7 percent – which means 6.5 percent growth is Chinas floor， not only for 2016， but for the entire period of 2016-2020.

2. Innovation is the key to Chinas growth plan. Li was up-front about this point： Chinas economic transition will live or die based on the countrys ability to innovate. “Innovation is the primary driving force for development and must occupy a central place in Chinas development strategy，” Li said. In fact， Chinas current blueprint calls for “scientific and technological advanc- es” to contribute 60 percent of the countrys economic growth by 2020.

3. The era of big investment isnt over. Continuing a focus laid out by the 12th National Party Congress first meeting in 2012， Li emphasized the need for consumerism and the service industry to drive economic growth going forward. But that doesnt mean China is turning its back on big-budget government investment projects as a means of boosting the economy. This year alone， Li said， in accordance with the new FYP， China will invest 800 billion RMB （$122.7 billion） in railways and 1.65 trillion RMB （$253.2 billion） in roads. And thats not including unnamed expenditures on a laundry list of“major projects” Li mentioned “to develop hydropower， nuclear power， ultrahigh-voltage power transmission， smart grids， pipelines for oil and gas transmission， and urban rail transit.”

4. The environment is a priority for Chinas government – but not its top priority. A renewed focus on the environment should come as no surprise， after Chinas recent commitments to reducing emissions and increasing clean energy usage on the international stage. By putting environmental commitments into Lis official work report， Chinas leaders have given the highest possible stamp of authority to Chinas great clean-up. In particular， Li spoke of the lofty goal to ensure that Chinas major cities have “good or excellent” air quality“for 80% of the year.”