Headline issues

Wellbeing, quality and sustainability: the new focuses of China’s transformation

  • The 14th Five-Year Plan (covering 2021–25) will be a crucial element in shaping the new era, for China and for the world. China’s transformation has seen it rise from low-income to upper-middle-income status in just over four decades. China will transform again in the next 30 to 40 years but – in contrast to the 20th century – this time with wellbeing, quality and sustainability at centre stage.
  • The 21st century growth story will be based on the accumulation of four types of capital central to human wellbeing – human, social, physical and natural.
  • It will also be driven by structural change towards a dominance of the service sector; by higher quality outputs and inputs; and by labour and resource efficiency and productivity.
  • Central to this transformation, the aim for China, as for the world, must be a net-zero-carbon economy within 30 to 50 years.
  • The new growth path can be a very attractive story, incorporating strong, sustainable and inclusive growth.
  • It offers an opportunity for developing countries to avoid the worst problems of pollution and congestion experienced by China and the developed economies.

Climate change, the 14th Plan and the Belt and Road Initiative

  • Well-planned investments along the Belt and Road can help China’s trade partners achieve the Sustainable Development Goals and in turn accelerate their realisation within China.
  • If in two decades’ time the other countries in the Belt and Road Initiative (BRI) have grown to enjoy a similar income per capita to China now, and if their economic structure of fossil fuel use looks like China’s now, then the world would be headed for temperature increases well beyond 3°C and the catastrophic consequences this would involve. This indicates very strongly that the 14th Plan and the BRI have to be understood together.
  • As China works on its 14th Plan it must take its decisions with careful thought given to how its BRI partners will be taking theirs, and to what forms the partnerships will take. The necessary changes to investment, particularly sustainable infrastructure investment, are significant and must happen swiftly.
  • An investment climate that fosters strong and sustainable innovation and investment can be created through two types of intervention: 1. Integrating sustainability and the long term into government and investment planning; 2. Strengthening and enforcing sustainable investment principles.

Further reforms in seven areas to drive the transformations of China’s new era

  1. Policy: Strong and clear price and regulatory signals will be needed for rapid and efficient change towards high-quality growth that embodies advanced technology and services and sustainability.
  2. Policy: Sound city planning and management are crucial.
  3. Policy: Major change inevitably involves some dislocation and national and local governments must take action to mitigate the negative impacts this could create.
  4. Finance: Investment in all four forms of capital will require a combination of private and public finance.
  5. Finance: The public finance of cities is interwoven with city planning, and with sound and sustainable investments. Transparency and efficiency of local taxation and expenditure will be crucial.
  6. Governance: Private investment is at the heart of the growth model of the new era and it is very sensitive to the quality of governance, as well as the quality of infrastructure services.
  7. Governance: China already has a key role in global governance. What happens to world trade and investment, to the global commons and to the future of international finance institutions is vitally important to China and the world.

Together, these systemic reforms could foster the investments in physical, human, natural and social capital that will drive forward China’s new era of high-quality, sustainable and inclusive growth and development. And at the same time China can provide great support for its partner countries in the Belt and Road as they seek sustainable and inclusive development.

An earlier draft of this paper was presented at the China Development Forum in Beijing in March 2019. It draws on a longer paper prepared for an Asian Development Bank Symposium in November 2018, entitled A new, high-quality and sustainable economic growth strategy for China: Reflections on issues for the next stages of reform, by Cameron Hepburn and Nicholas Stern with Hannah McNicol and Isabella Neuweg.

Keep in touch with the Grantham Research Institute at LSE
Sign up to our newsletters and get the latest analysis, research, commentary and details of upcoming events.