In case you had forgotten that China is still a communist state, this week's launch of its latest five-year plan should come as a handy reminder.
Communist monoliths have always been wedded to five-year plans. Stalin launched the first five-year plan in 1928, and the Soviets continued to plague their population with plans until the unlucky 13th plan, which collapsed after one year (along with the Soviet Union) in 1991.
Chairman Mao followed Stalin's lead in 1953, and the Chinese government is now just one shy of lucky number 13, with Premier Wen Jiabao launching the 12th five-year plan to cover the years 2011 to 2015.
In the West, five-year plans are a byword for centrally planned brutality, famine, pollution, inefficiency, and phony tractor production figures. This is a bit worrying, because this isn't just a five-year plan for one country. Given China's global economic clout, it is a five-year plan for all of us. So is it good news?
A man with a plan
So what's the plan?
The headline figure is that China is targeting GDP growth of 7% a year for the next five years, Premier Jiabao has said, down from 7.5% in the last five-year plan.
The aim appears to be calming the country's breakneck GDP growth, and switching the focus to improving living standards, boosting energy efficiency, and securing sustainable growth.
Some say China is aiming for a "fairer, greener society," which reminds me of George Bush's pledge back in 1988 to create a "kinder, gentler nation." This is the kind of thing politicians say. The reality is often different.
Even the most freebooting and five-year-plan-phobic Westerners will have noticed that China has developed the irritating habit of not just hitting its targets, but dramatically exceeding them.
Last time round, the economy actually grew around 10%. It could easily outperform this time as well. Controlling the juggernaut won't be easy.
A cunning plan
If China does go all green and caring, it may win less applause than it expects. Investors in the global recovery in general and commodity prices in particular are hungry for the next chapter of the China growth story, and they want it to be a rattling good read. Germany is also avidly awaiting the next installment, as its recent export bonanza could be hit by slowing Chinese demand.
Personally, I will believe the "fairer, greener society" rhetoric when I see the results. And even fair and green societies need robust growth to keep their populations happy and off the streets.
GDP will still be the priority, as it is everywhere.
Of Mao and men
So what would the West like to see?
It would be delighted to see growth in domestic Chinese consumption, as this would pave the way for greater Western exports. That might happen, to a degree. The plan is to increase the minimum wage by at least 13% a year -- or 84% over five years -- which would boost incomes among migrant workers. They might then spend some of that money on Western goodies.
Growing domestic consumption might also help reduce China's massive current-account surplus, which is running at nearly 6% of GDP, and soothe U.S. irritation over the continuing undervaluation of the Yuan.
And what would investors like to see? Naturally, we want the China growth story to power on, and drive our emerging market holdings to new heights. The last thing we want is the bubble to burst. Although it is worth noting that China's soaring GDP doesn't automatically convert into soaring stock market returns.
China's attempts to restrain its runaway growth by applying the whip of regular interest rate hikes and tougher banking reserve requirements have unnerved investors and hit markets this year.
A growing China should boost our growth by sucking in imports of Western technology. Although given China's plan desire to boost "indigenous innovation," the impact may prove a disappointment, particularly if it retains its cavalier attitude to intellectual copyright.
I don't see that trade surplus shrinking any time soon.
The best laid plans
It may have a cunning plan, but China isn't in complete control of its own destiny. Inflation remains a major concern. An oil shock will hit it even harder than the West, because its economy has a higher oil intensity than the developed world. This might explain its recent decision to interfere in Libya.
Also, China is only global economic powerhouse No. 2, and the long-standing No. 1, the U.S., is still able to distort its markets, as it did last November, by unleashing QE2.
China is a country with a plan. The good news for investors is that it still believes it can continue growing strongly over the next five years, and given recent dips, this could be a good buying opportunity. That doesn't mean there won't be a better one later, of course.
But you know what Scottish poet Robert Burns said about the best laid plans of mice and men? They "Gang aft agley"*. Even the five-year ones.
More from Harvey Jones:
- How Long Should You Give a Stock to Recover?
- Is the Emerging Markets Story Over?
- Cast Miners Out of Your Portfolio
*Go often awry, in English.
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