1 00:00:02,360 --> 00:00:09,480 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. I'm Stephen Carol and 2 00:00:09,560 --> 00:00:11,960 Speaker 1: this is Here's Why, where we take one new story 3 00:00:12,000 --> 00:00:14,080 Speaker 1: and explain it in just a few minutes with our 4 00:00:14,120 --> 00:00:22,360 Speaker 1: experts here at Bloomberg. A difficult situation in China, the economy. 5 00:00:22,720 --> 00:00:25,159 Speaker 1: I still think actually for next year, the focus is 6 00:00:25,160 --> 00:00:27,159 Speaker 1: going to be on the five year plan. The growth is. 7 00:00:27,160 --> 00:00:30,480 Speaker 2: Still very, very unbalanced. A year later, we're still now 8 00:00:30,520 --> 00:00:33,200 Speaker 2: debating whether you're going to need another policy support. 9 00:00:33,280 --> 00:00:35,879 Speaker 1: Going into September, pol of Bureau meeting demand side is 10 00:00:35,920 --> 00:00:38,320 Speaker 1: not doing very well. Not for the first month. This 11 00:00:38,440 --> 00:00:40,919 Speaker 1: is already the fourth month we're talking about. They are 12 00:00:40,960 --> 00:00:44,159 Speaker 1: actually quite happy with how their economy performed in the 13 00:00:44,200 --> 00:00:46,800 Speaker 1: first half of last year, but they know that the 14 00:00:46,800 --> 00:00:50,080 Speaker 1: consumer stimulus that they employed can't be effective forever. 15 00:00:50,360 --> 00:00:54,800 Speaker 2: Washington is dealing with a much more assertive Beijing. We 16 00:00:54,840 --> 00:00:57,120 Speaker 2: think it's the defining conflict of this generation. 17 00:00:58,040 --> 00:01:01,160 Speaker 1: The Chinese economy is facing a host of challenges, and 18 00:01:01,200 --> 00:01:04,399 Speaker 1: Beijing has a plan, or at least it will. The 19 00:01:04,440 --> 00:01:07,000 Speaker 1: country's next five year Plan will chart a path for 20 00:01:07,120 --> 00:01:10,760 Speaker 1: China's economic and social development from twenty twenty six to 21 00:01:10,800 --> 00:01:15,200 Speaker 1: twenty thirty, and it's a strategy that has global consequences. 22 00:01:15,480 --> 00:01:19,760 Speaker 1: Here's why China's next five year plan matters for the world. 23 00:01:21,840 --> 00:01:24,919 Speaker 1: Jenny Marsh, who leads Boomberg's team covering China's economy and government, 24 00:01:25,000 --> 00:01:28,039 Speaker 1: joins me now for more. This plan is going to 25 00:01:28,040 --> 00:01:30,840 Speaker 1: be finalized at an upcoming meeting of policymakers, the so 26 00:01:30,920 --> 00:01:35,080 Speaker 1: called Fourth Plenum. What's the economic context that they'll have 27 00:01:35,200 --> 00:01:35,679 Speaker 1: in mind. 28 00:01:36,760 --> 00:01:39,760 Speaker 2: Well, since China made its last five year plan, a 29 00:01:39,840 --> 00:01:44,160 Speaker 2: lot has happened. Obviously, we've had the pandemic, which just 30 00:01:44,200 --> 00:01:47,360 Speaker 2: sort of upending global supply chains, and ever since then, 31 00:01:47,680 --> 00:01:50,160 Speaker 2: the Chinese economy has really just feel on shaky ground. 32 00:01:50,720 --> 00:01:53,560 Speaker 2: It's a property crisis. Now it's just grinding on. It's 33 00:01:53,560 --> 00:01:58,080 Speaker 2: been years. China's battling entrenched deflation, looking at its third 34 00:01:58,200 --> 00:02:02,040 Speaker 2: year of fulling prices across the economy this year. Its 35 00:02:02,120 --> 00:02:05,440 Speaker 2: companies are sort of locked in these price wars, which 36 00:02:05,520 --> 00:02:09,560 Speaker 2: is hurting their bottom lines and affecting job growth. And 37 00:02:09,680 --> 00:02:11,359 Speaker 2: of course you know now they're in a trade war 38 00:02:11,440 --> 00:02:13,800 Speaker 2: as well. So the one thing that's going right for 39 00:02:13,840 --> 00:02:17,400 Speaker 2: the Chinese economy, which is exports, are under a lot 40 00:02:17,440 --> 00:02:20,519 Speaker 2: of pressure now politically from the US, but also other countries. 41 00:02:20,960 --> 00:02:22,880 Speaker 2: So they go into this meeting with a lot of 42 00:02:22,960 --> 00:02:23,959 Speaker 2: problems to solve. 43 00:02:24,880 --> 00:02:27,200 Speaker 1: So just remind us what sort of policies have gone 44 00:02:27,240 --> 00:02:29,079 Speaker 1: into previous five year plans. 45 00:02:30,520 --> 00:02:33,640 Speaker 2: So China adopted this model from the Soviet Union and 46 00:02:33,720 --> 00:02:35,880 Speaker 2: ever since then they have to sort of emulate that 47 00:02:36,000 --> 00:02:39,320 Speaker 2: system every five years. And in the beginning it was 48 00:02:39,320 --> 00:02:43,120 Speaker 2: sort of very detailed specific targets. But since the beginning 49 00:02:43,160 --> 00:02:46,520 Speaker 2: of this century, rather than setting such detailed targets, they've 50 00:02:46,560 --> 00:02:50,440 Speaker 2: shifted into this mode of focusing on broader tasks and objectives. 51 00:02:50,919 --> 00:02:55,000 Speaker 2: The last five year plan was significant because they moved 52 00:02:55,000 --> 00:02:57,680 Speaker 2: away from setting a specific growth target, which they used 53 00:02:57,720 --> 00:03:00,720 Speaker 2: to do, and now it's much more about being a 54 00:03:00,840 --> 00:03:04,400 Speaker 2: broader around the growth target and sort of saying that, 55 00:03:04,440 --> 00:03:07,880 Speaker 2: you know, they're looking for a high growth environment or 56 00:03:07,880 --> 00:03:09,920 Speaker 2: that kind of thing, but we're not gonna get a 57 00:03:09,919 --> 00:03:12,840 Speaker 2: specific number in the way that we used to. But 58 00:03:13,040 --> 00:03:14,880 Speaker 2: for example, in the last five year Plan, there's that 59 00:03:14,919 --> 00:03:18,800 Speaker 2: this long term target of basically achieving socialist and modernization 60 00:03:19,320 --> 00:03:22,680 Speaker 2: by twenty thirty five. So that's quite vague, typically like 61 00:03:22,760 --> 00:03:26,360 Speaker 2: communist party sort of term, but it translates to things 62 00:03:26,360 --> 00:03:30,919 Speaker 2: like significant gains in GDP technological innovation, increasing in plak 63 00:03:30,919 --> 00:03:34,400 Speaker 2: cappita income and the size of the middle income group 64 00:03:34,480 --> 00:03:36,640 Speaker 2: in China. These are the sort of things we've seen 65 00:03:36,640 --> 00:03:37,680 Speaker 2: in the past. 66 00:03:38,240 --> 00:03:40,800 Speaker 1: How does this plan get drawn up? What's the process? 67 00:03:41,400 --> 00:03:45,240 Speaker 2: It is a months long process, and the contributors even 68 00:03:45,280 --> 00:03:48,560 Speaker 2: include choosing Ping himself, who back in April convened a 69 00:03:48,640 --> 00:03:52,440 Speaker 2: seminar in Shanghai with provincial governors where he gets input. 70 00:03:52,600 --> 00:03:56,120 Speaker 2: According to state media, at least the central government invites 71 00:03:56,160 --> 00:03:59,960 Speaker 2: the public to submit suggestions through a website, and then 72 00:04:00,120 --> 00:04:03,720 Speaker 2: top policymakers in the polyp Bureau huddle behind closed doors. 73 00:04:04,200 --> 00:04:07,360 Speaker 2: We've seen hints on the polet Bureau the meetings. They've 74 00:04:07,400 --> 00:04:12,280 Speaker 2: talked about developing new productive forces, tech innovation, scientific expansion. 75 00:04:12,880 --> 00:04:16,640 Speaker 2: But by the time I get to this planum, everything 76 00:04:16,720 --> 00:04:19,600 Speaker 2: is decided. And so it's a four day meeting where 77 00:04:19,600 --> 00:04:21,479 Speaker 2: they're going to sort of talk about things, but really 78 00:04:21,560 --> 00:04:23,640 Speaker 2: by the time they get there, it's all written down 79 00:04:23,680 --> 00:04:25,279 Speaker 2: and they're kind of got in the eyes and crossing 80 00:04:25,320 --> 00:04:25,679 Speaker 2: the t's. 81 00:04:26,080 --> 00:04:28,120 Speaker 1: So what do we know then about what might be 82 00:04:28,160 --> 00:04:29,400 Speaker 1: in this upcoming plan. 83 00:04:29,960 --> 00:04:32,360 Speaker 2: We do know that the government is considering a new 84 00:04:32,480 --> 00:04:35,520 Speaker 2: version of She's made in twenty five campaign, and that 85 00:04:35,640 --> 00:04:38,760 Speaker 2: focused on making a China a leader in high tech goods. 86 00:04:39,240 --> 00:04:41,360 Speaker 2: So we had a scoop about that back in May, 87 00:04:41,720 --> 00:04:43,320 Speaker 2: and that's one of the key things we'll be looking 88 00:04:43,320 --> 00:04:47,200 Speaker 2: out for Made in twenty twenty five is this sort 89 00:04:47,200 --> 00:04:50,280 Speaker 2: of idea of made in China is bringing high tech 90 00:04:50,360 --> 00:04:54,320 Speaker 2: sort of goods to Chinese production, moving up the value chain, 91 00:04:54,800 --> 00:04:57,800 Speaker 2: and so this is central to China's ambition to take 92 00:04:57,839 --> 00:05:01,400 Speaker 2: on the US in areas from chip design all the 93 00:05:01,440 --> 00:05:04,160 Speaker 2: way through to aviation. We will look out for the 94 00:05:04,240 --> 00:05:07,000 Speaker 2: language around growth. They're going to have to address the 95 00:05:07,040 --> 00:05:09,799 Speaker 2: fallout from the property market collapse, which is now dragging 96 00:05:09,839 --> 00:05:13,800 Speaker 2: on twenty twenty one. There's rising youth unemployment. There could 97 00:05:13,880 --> 00:05:17,000 Speaker 2: be policies to target that, and we think as well, 98 00:05:17,040 --> 00:05:19,240 Speaker 2: inclusive growth is going to be a big thing for 99 00:05:19,360 --> 00:05:23,320 Speaker 2: social stability, so that's expanding the social welfare net, so 100 00:05:23,920 --> 00:05:26,800 Speaker 2: policies indicating they're going to do more for pension provision 101 00:05:27,279 --> 00:05:30,680 Speaker 2: for people with families. At that symposium in April that 102 00:05:30,760 --> 00:05:34,600 Speaker 2: she hosted, they did say that this plan should stabilize employment, 103 00:05:35,040 --> 00:05:38,880 Speaker 2: the business environment, and market expectations. So these are sort 104 00:05:38,920 --> 00:05:40,919 Speaker 2: of some of the breadcrumbs that we have so far. 105 00:05:41,400 --> 00:05:43,960 Speaker 1: Should we expect to hear more about China's trade policies 106 00:05:44,040 --> 00:05:46,400 Speaker 1: given the ongoing tensions with the US. 107 00:05:47,440 --> 00:05:50,839 Speaker 2: I think that yes, But indirectly, this kind of a 108 00:05:50,920 --> 00:05:54,960 Speaker 2: broad policy document probably won't mention the US by name. 109 00:05:55,400 --> 00:05:58,760 Speaker 2: It won't address such current issues, but of course it 110 00:05:58,800 --> 00:06:01,920 Speaker 2: will lay out priority use in the industrial sector, and 111 00:06:01,960 --> 00:06:04,120 Speaker 2: it will talk about how China wants to shape its 112 00:06:04,120 --> 00:06:06,840 Speaker 2: economy in the next five years. We expect there's going 113 00:06:06,880 --> 00:06:11,000 Speaker 2: to be a shift to domestic services, prioritizing those. You know, 114 00:06:11,000 --> 00:06:14,280 Speaker 2: when it comes to consumption, China's goods consumption is actually 115 00:06:14,360 --> 00:06:18,440 Speaker 2: very strong on par with other developed countries in the 116 00:06:18,520 --> 00:06:21,680 Speaker 2: US economy, but when it comes to service consumption, that's 117 00:06:21,760 --> 00:06:24,280 Speaker 2: quite weak. And so that matters for the US because 118 00:06:24,760 --> 00:06:27,240 Speaker 2: they really want China to try to rebalance their economy 119 00:06:27,720 --> 00:06:31,760 Speaker 2: to be less reliant on exporting and more dependent on 120 00:06:31,839 --> 00:06:35,120 Speaker 2: the domestic consumer. The policies in this document are going 121 00:06:35,160 --> 00:06:37,680 Speaker 2: to be very much of interest to the US, and 122 00:06:37,760 --> 00:06:41,080 Speaker 2: that have ramifications for China's global trade relationship. 123 00:06:41,800 --> 00:06:43,599 Speaker 1: What else should we look out for in terms of 124 00:06:43,640 --> 00:06:46,800 Speaker 1: what's in this plan that might affect countries elsewhere in 125 00:06:46,839 --> 00:06:47,240 Speaker 1: the world. 126 00:06:48,160 --> 00:06:50,520 Speaker 2: I think it's really going to be about. I suppose 127 00:06:50,560 --> 00:06:52,799 Speaker 2: the tone that China takes to the rest of the world. 128 00:06:52,800 --> 00:06:55,960 Speaker 2: Are they talking about sort of embracing the systems that 129 00:06:56,000 --> 00:06:58,520 Speaker 2: we already have in terms of the UN and the 130 00:06:58,680 --> 00:07:02,680 Speaker 2: wto more signs that China wants to maintain the status quo. 131 00:07:03,480 --> 00:07:05,760 Speaker 2: And then I really think it's this idea of rebalancing. 132 00:07:06,120 --> 00:07:08,880 Speaker 2: Scott percent has already specifically said he is looking to 133 00:07:08,960 --> 00:07:12,160 Speaker 2: the five year Plan and he has asked Chinese officials 134 00:07:12,640 --> 00:07:15,560 Speaker 2: to write this plan with a view to rebalance the 135 00:07:15,640 --> 00:07:19,520 Speaker 2: Chinese economy away from flooding global markets. And that's a 136 00:07:19,600 --> 00:07:23,360 Speaker 2: concern not just for the US, but for Europe. Even 137 00:07:23,600 --> 00:07:27,880 Speaker 2: friendly countries in Latin America such as Brazil have been 138 00:07:28,000 --> 00:07:30,360 Speaker 2: raising concerns about this. So I think a lot of 139 00:07:30,400 --> 00:07:32,360 Speaker 2: people are going to want to see efforts to get 140 00:07:32,440 --> 00:07:35,640 Speaker 2: the Chinese consumer spending. China has one point four billion people. 141 00:07:36,280 --> 00:07:37,720 Speaker 2: Why does it need to rely on the rest of 142 00:07:37,760 --> 00:07:40,280 Speaker 2: the world to buyas products? I think that probably is 143 00:07:40,320 --> 00:07:44,200 Speaker 2: the thing. From an international perspective, foreign governments will be 144 00:07:44,200 --> 00:07:44,960 Speaker 2: really looking. 145 00:07:44,680 --> 00:07:47,600 Speaker 1: Towards Okay, we'll be watching out to see what indications 146 00:07:47,640 --> 00:07:50,680 Speaker 1: we might get. Jenny Marsh leading our team covering China's 147 00:07:50,720 --> 00:07:55,360 Speaker 1: economy and government. Thank you. For more explanations like this 148 00:07:55,440 --> 00:07:58,240 Speaker 1: from our team of three thousand journalists and analysts around 149 00:07:58,280 --> 00:08:01,880 Speaker 1: the world, go to Bloomberg dot com slash explainers. I'm 150 00:08:01,880 --> 00:08:04,640 Speaker 1: Stephen Carol. This is here's why. I'll be back next 151 00:08:04,640 --> 00:08:06,280 Speaker 1: week with more. Thanks for listening.