12th Five Year Plan Hailed as ‘Greenest FYP in China’s History’

April 5, 2011 Posted by China Briefing Reading Time: 4 minutes

By Cory Lam

Apr. 5 – One of the most significant messages that emerged from the Annual Sessions of China’s National People’s Congress last month was undoubtedly the importance and urgency to create a “green” China – one where sustainable development will be the top priority and one which will be fully compatible with China’s economic plans for growth.

China’s new 12th Five Year Plan (FYP), hailed as the “Greenest FYP in China’s History,” contains a series of social and economic objectives to be achieved by 2015, of which one-third are targets relating to natural resources and environmental issues, aiming to build sustainable development practices into Chinese industries.

The new targets are no less ambitious than those from the last FYP, where the government managed to successfully reduce China’s energy intensity by 20 percent from 2006 to 2010. The new targets, signed off by the NPC and the State Party earlier this month, intend to lower energy intensity by a further 16 percent over the next five years. Other equally impressive goals arising from the Annual Sessions include China’s goal to boost the proportion of non-fossil fuels in overall primary energy use from the current 8 percent up to 11.4 percent; to cut CO2 emission by 17 percent overall; and to reduce major pollutant emissions, such as heavy metal and chemical waste from manufacturing processes, by around 8 percent to 10 percent.

As the world’s largest energy consumer, the Chinese government is now raising the bar in pursuing sustainable industries in response to growing international pressures while at the same time trying to ensure continuing domestic expansions across its sectors. A few days after the 12th FYP was approved, a new circular on renewable energy architecture was already issued with specific targets to increase renewable energy constructions and to strengthen quality control in this area. By investing in its own renewable energy sector, not only does it demonstrate to the world that China is committed to environmental protection, it is also a smart move by the country’s leadership to protect their own interests, seeing as the more energy China can produce internally, the more self-reliant the Chinese manufacturing industries can become. According to reports, a projected RMB3.9 trillion will be invested in key sectors identified for growth in the next five years, including industries such as clean energy and environmental protection.

Although traditionally it had been relatively difficult for foreign investors to get involved in the renewable energy market, it is possible that new avenues could be opening up in this sector as China pushes forward with the new environmentally-friendly FYP. In order to restructure and upgrade Chinese industries with the new targets in mind, authorities have recognized that there is a need for foreign input in terms of new investment and technologies in these areas.

“China should accelerate its economic transformation by utilizing fast-growing foreign investment to develop its high-tech, service and advanced-agricultural industries, all of which are crucial to its long-term economic development,” said Huo Jianguo, director of Chinese Academy of International Trade and Economic Cooperation – the official research institute run by the Ministry of Commerce. Huo also predicted that the expected developments in high-end manufacturing industries like clean energy, environmental protection and service industries, for example, will become the “new drivers of the country’s economy.”

Separately, at a recent news conference following the Annual Sessions, Premier Wen Jiabao further indicated that the government is currently working on detailed policies which would promote the development of the private economy, building on foundations laid last year by the government when 36 new guidelines were introduced to improve the fairness in competition and transparency in the private industry. While it is unclear whether “private economy” mentioned here includes foreign enterprises, it is certain that the changes under discussion would have some impacts on foreign investors – particularly those already incorporated in the market under joint venture projects.

Unsurprisingly, the new FYP has yielded mixed reviews from the international audience. Some, like the environmental organization The Climate Group, are welcoming and optimistic on receiving the news.

“It is hugely symbolic that China is putting green growth at the core of its national development plan and should be a wake-up call to Europe and North America policy-makers that a clean tech race is well under way,” said the group’s CEO, adding, “this will ensure the country remains a major global hub for clean energy technologies for years to come.”

However, similar to the reactions received by the plan’s predecessors, many have once again criticized its unoriginality, over-ambitious goals and lack of details in the strategies released thus far. With other parts of the FYP seemingly contradictory to its green targets – like recent proposals for China to build 45 new airports over the next five years, or by still considering nuclear power as a form of “clean” energy in expansion plans moving forward – the skepticism received is not entirely unfounded.

In spite of the above, the fact remains that in the past, one way of another, the Chinese government has managed to achieve equally controversial targets, even if that meant using unconventional methods such as organized power cuts in selected cities for days at a time or shutting down factories at the last minute to meet deadlines, as was witnessed during the last FYP period. At such an early stage, it is difficult to predict the exact measures that will be adopted by the Chinese government this time. However, when taken into account the Chinese government’s determination not to “lose face” and to honor its promises to the world, one would be wise not to jump to quick conclusions, at least not just yet.