SPECIAL REPORT: China's Five Year Plan, In Depth Analysis

Very exciting times. Over the weekend the Communist Leaders of China unanimously passed China's new five year policy (FYP). A document that outlines the country's trajectory for the next 5 years, it was sent to the National People's Congress for debate on Saturday. The plan outlines significant economic changes that have caught the attention of the international community. When the world's second largest economy details plans for a 12.5% upgrade in military spending, an environmental 180 and a significant economic shift; the world better take notice. Based on the Soviet model for detailing government policy, the FYP is an ambitious shift for the world's most populous country.

CHINA GOING GREEN?


Not quite. It has long been known that China is the world's largest polluter.  Emitting a little over 22% of the global CO2 emissions, China emits more CO2 then the world's 150 least polluting countries; or put a different way,  China emits roughly the same amount of CO2 as (4) Russia, (3) India,(7) Canada,(6)) Germany,(8) U.K,(9) South Korea combined! As a result of China's seemingly limitless expansion, the International Atomic Energy Association suggested back in July that unless China can cap its environmental emissions and degradation by 2050, there will be no point for any other country to cut them.

The environmental shift detailed in the FYP is a move in the right direction, however it would be much to early to award China  'Greenpeacer of the year'. As China seeks to continue its overly impressive economic growth, government economists have suggested that the Chinese economy move into a more sophisticated direction. Historically the world's factory, Chinese officials believe it is time for a shift that will be key to further economic expansion as the economy is introduced to the idea of 'value added' goods. Put simply, value added goods are products which add more value through developing a longer cycle of production.  The Green Revolution provides the Chinese with that opportunity to capitalize on a new era of technological evolution in almost every sector.

An environmental shift in Chinese policy follows the overarching perspective of keeping social instability at a minimum. After all, what good is economic opportunity and personal development, if your not healthy enough to capitalize on it?

Dont Be Fooled

Ever since the devastating failure of the 'Great Leap Forward' proposed by Chairman Mao in 1958 which saw the death of between 20-48 million Chinese citizens, successive Governments have pursued a concerted policy effort that demands the economy grow at an annualized rate of 7%. The reasoning for this seemingly large target is simple, achieve a growth rate of 7% per year, or risk massive social unrest, instability and chaos.

So when the Chinese FYP stated that the economic goal is to achieve annual growth of 7% between 2011-2015, it should not be taken out of context. Furthermore, the Chinese Government routinely underestimates growth trajectories to appease and ensure public contentedness when releasing economic data that demonstrates an increase into the 9-11% percent growth range. This tactic is not relegated to simply the Chinese.

Even more disturbing for the global economic order, the new plan details an important economic shift. The shift from a manufacturing based economy to one predicated on consumption. This change has garnered the attention of eyes and ears of policy makers from around the world. China has already surpassed the US as the world's largest car maker. Imagine that even 1/10th of the Chinese population consumed the same amount of the top 20% of Americans? That would be an additional 160 million Chinese purchasing TVs, Ipads, Laptops, cell phones, guzzling more gas and eating more McDonald's. Sure, music to the ears of the corporate China and corporate America. A consuming China would also indisputably help re-shift the massive trade imbalance with the US. According to new economic date from China's main news source, the Chinese are expected to surpass the Japanese as the world's largest consumer of high-end products by 2015.
Can anything stand in the way of this Juggernaut? It seems it was just yesterday the Chinese surpassed the Germans as the world's 3rd largest economy and second largest automaker.

In order for the Chinese populous to consume more, history teaches us, that some across the globe will inevitably be forced to consume less and the primary target for a consumption downgrade is the US. If the FYP is to succeed such a policy will inevitably lead a course toward economic tensions between the world's two superpowers.


Put Your Money Where Your Mouth Is

Unlike decades past, the Chinese have never possessed the ability to back up its political or economic rhetoric. But that may change with the recent announcement that China will increase military spending by 12.5% this year. Defending the increase to 91.5 billion USD (although most experts suggest the actual number could easily be double or triple that), Chinese officials tired to assure the global community that the increase is solely to maintain stability. In support of this the Chinese acknowledge that a 40% increase for the world's largest army (2.1 million standing soldiers) will be in order. To down play the double digit rise, similar increases in the administrative, logistics and R&D budgets were supported. Granted the budget is not remotely close to the Pentagon's $533 Billion USD for 2011. But actions speak louder then words. The inaugural test flight of a stealth fighter jet earlier this month when Secretary of State Robert Gates visited China tells a different story.

As a result of the explosive economic growth, China has become less appeasing with her Asian neighbors. Japan has outwardly expressed concerns over any Chinese military or naval build up and has put the global community on alert that any further military increase on the behalf of the Chinese will be met with a similar build up on the part of the Japanese. An all Asian arms race has been a cause for concern in strategic circles and the recent budget expansion only furthers this possibility. Further tensions between the Chinese and Japanese will evolve when the Chinese dispatch their first aircraft carrier which will be anchored in the East China Sea, a body of water that divides the Japanese islands and Chinese homeland.

Any time the Chinese have attempted to expand even minute spheres of influence, the US navy was on the scene instantly to remind them who's backyard they are digging in. After all, since the fall of the Berlin Wall the entire globe has been under the influence of the US Navy.Recent examples include, Vietnam, Desert Storm, and the War On Terrorism. That could change in the next few years as China is set to commission it's first Aircraft Carrier. This is no small  feat. Aside from engineering and technological expertise, an aircraft carrier requires experienced naval personnel. The Chinese have purchased the former from the Russians and have employed the expertise of the Brazilians for the latter.

For those of you who believe the aircraft carrier is simply another boat in the naval arsenal consider the following. The US is the only country in the world to commission a Nimitz Class aircraft carrier. This nuclear powered behemoth, aptly titled 'supercarrier', displaces 100,000 tons of water, can reach speeds of 30 knots (56 KM/H), costs roughly 4.5 billion per and at a length of 1033 feet is the largest naval ship ever commissioned. The US navy has 10 of these engineering marvels in service, no other country has one. The technologies used in the design of these titans are a more closely guarded state secret then the nuclear launch codes.

Simply put, when an aircraft carrier is set to sea (above) it is surrounded by a superlative arsenal of submarines, destroyers, battleships and air-power. Aircraft carriers are considered the 'heart of the navy' for a reason. If they are sent anywhere, it is message to everyone that the navy is on the scene. The purpose of building and maintaining a navy (aside from the obvious) can be summed up in a word. INFLUENCE. With the creation of China's first carrier, it is also sending a message, it has ambitions to exert more influence at the international level.

Let the Games Begin

China's FYP may change 5 years from today. China may encounter different problems which require different solutions. The current FYP has raised alarm bells across the globe. The sole reason for these alarm bells is the result of a threat to the status quo. Every empire has it challenges. It should therefore not come as a surprise to anyone that the United States is taking the FYP so seriously. After all, America was never expected to sustain an empire with the endurance and scope as Rome.......Was it?