2011 report to congress - U.S.-China Economic and Security Review ...

dkrause on DSKHT7XVN1PROD with $$_JOBSECTION 4: CHINA’S 12TH FIVE-YEAR PLANAND TECHNOLOGY DEVELOPMENT ANDTRANSFERS TO CHINAIntroductionWhile China seeks to be considered a market-oriented economy,its government continues to engage in comprehensive economicplanning, direction, support, and control. During the 2011 reportcycle, the Commission examined various aspects of China’s industrialpolicy and the implications it may have for U.S. companiescompeting for a share of the Chinese market. This section continuesthe discussion started in sections 2 and 3 of this Report,with a particular focus on China’s newly adopted 12th Five-YearPlan (2011–2015). This section also addresses the policies aimed athelping China move up the manufacturing value-added chain, fosteringstrategic emerging industries (SEIs), which include new-generationinformation technology, high-end manufacturing, alternativeenergy, and biotechnology, and completing its transformationto a global technological powerhouse.China’s rapid industrialization and economic growth during thepast 30 years has often been attributed to liberalization policies undertakenas part of its ‘‘reform and opening up’’ era. But that onlytells half the story. Chinese economic development during the sameperiod has relied extensively on a government-directed industrialpolicy to promote certain segments of the economy and support export-ledgrowth. Many such policies are outlined in five-year plansthat identify broad development goals. The process then developsregulations, guidelines, and tools to accomplish those objectives.Examples include providing subsidies to companies in select industriesand encouraging foreign investment of money and technologyin target sectors. Aaron L. Friedberg, professor at Princeton University,noted that ‘‘vital though imports have undoubtedly been, itis foreign direct investment that has served as the ‘decisive catalyst’propelling China up the high-tech ladder.’’ 310China’s 12th Five-Year PlanChina began implementing five-year plans in 1953 in order toalign the economy with top policy goals and to communicate thisdirective throughout the government bureaucracy. 311 Five-yearplans are designed to be roadmaps for regulators and provincial officials,who are responsible for their implementation and act as‘‘key indicators of the directions and changes in development philosophy’’at the highest levels of Chinese leadership, according toCindy Fan, a professor at the University of California, LosAngeles. 312VerDate Nov 24 2008 13:46 Nov 10, 2011 Jkt 067464 PO 00000 Frm 00100 Fmt 6601 Sfmt 6601 G:\GSDD\USCC\2011\067464.XXX 067464(88)