China’s 12th Five Year Plan.

China‘s economy has seen enormous benefits from fixed asset investments, particularly in response to the financial crisis of 2008, which significantly reduced net exports. This investment-led growth, however, is widely perceived as non-sustainable and China‘s leadership addressed this concern in its 12th Five-Year Plan (12th 5YP). The plan aims to increase consumption activity from approximately 35 percent of GDP in 2010 to 50 percent by 2015.

China’s 12th Five Year Plan (2011-15) highlighted seven major emerging strategic industries which include;

  • Energy-saving and environment protection for energy reduction targets
  • New-generation information technology broadband networks, internet security infrastructure, network convergence
  • Biotechnology drugs and medical devices
  • High-end equipment manufacturing aerospace and telecom equipment
  • New energy in nuclear, win and solar power
  • New materials rare earths and high end semiconductors
  • Clean energy vehicles

The focus of the new-generation information technology industry will be on next generation telecommunication networks, next generation internet technologies, internet of things, triple network convergence (telecom, computer and cable TV networks), cloud computing, integrated circuits, new generation displays, high end software, high end servers and information services.

There is an Innovation Target of 3.3 patents per 10,000 people and an education target of increasing high school enrollment ration unto 87%.

These industries, including new energy sources and biotechnology, are distinguished by their high profit growth potential and moderate state oversight. In these areas, the government has dedicated itself to incubating national and global champions by helping them gain leading technologies and expanding their commercial capabilities.  Although significant uncertainties remain in such young markets, companies that compete in them should focus on building core competitiveness in technological and commercial capabilities, as well as on gaining recognition as local innovators.

Domestic players are going to concentrate on acquiring leading technologies and building relationships with local governments. Foreign companies must bring advanced technology and be seen as trusted partners for local innovation.

Domestic Consumption

The industries that will benefit most from the government’s efforts are those that can boost domestic consumption are consumer-facing ones such as airlines, fast-moving consumer goods, food, pharmaceuticals, shipping, and tourism. These domestic-consumption engines, have a good landscape for profit growth and reasonably free markets, and also benefit from the government’s attention to social harmony and “green” development.

To capture the greatest growth opportunities, companies must increase their market penetration and offer tailored products for core customer segments. They should also closely monitor the development of specific domestic consumption-enhancing government policies.

The government is aiming to shape the competitive environment in industries such as education, financial services, health care, and logistics through deregulation. This should further open the market to foreign companies. Increased attention to food and drug safety and to quality gives companies with a solid reputation for high standards an opportunity.