The National People’s Congress of the People’s Republic of China adopted the “Outline of the 14th Five-Year Plan (2021-2025) for National Economic and Social Development and the Long-Range Objectives Through the Year 2035” (hereinafter referred to as the “Outline”) and announced it on March 13th. The purpose is to plan the goal of development of modernization in the future. Compared to the previous “13th Five-Year Plan,” Beijing has added a 10-year long-term goal after the 14th Five-Year Plan, which seems to be more forward-looking. However, from the perspective of an economic strategy, Beijing is actually turning conservative, hoping to independently expand domestic demand in response to the double uncertainties caused by COVID-19 and the strategic competition between the U.S. and China.

COVID-19 has caused the shrinking of the global economy. With the vaccination schedule rolling out, the expectation for opening up borders, and the rebound of the economy, the International Monetary Fund estimates China to have an economic growth rate of 8% this year. However, there are still considerable uncertainties. First of all, we need to consider COVID variants and them becoming influenza in the future. This creates a major uncertainty about whether the vaccine can effectively prevent the spread of the virus and the pandemic. In addition, the U.S.-China trade war that started before the outbreak with the subsequent new cold war in technologies and economic decoupling have caused uncertainty in China’s internal growth in innovation and its prospects for exports. The change of government in the U.S. with the Biden administration does not ease the tensions.

The fact that the “Outline” no longer sets a five-year GDP growth target but only mentions briefly the vision of reaching the income of a medium developed country by 2035 is enough to show that Beijing is indeed responding to the above-mentioned double uncertainties with conservative and prudent planning. In addition to avoiding setting goals, the projects that Beijing has laid down in the “Outline” are exports, investment, and the attraction of foreign direct investment (FDI). Subject to the U.S.-led control and sanctions on technology, not only has the market acceptance of China’s ICT products fallen sharply, but their own investment abroad and FDI related to key technology items are also subject to strict inspections. Therefore, the only options left for the “international circulation” to expect are exports, investment, and key infrastructure construction in markets along the “Belt and Road.”

Apart from the tone and options of avoidance and downplaying, self-reliance and self-development to promote modernization is the main theme emphasized by Beijing in the “Outline,” and both retain the strategic room for choosing between offensive advancement and defensive retreat. Self-reliance refers to the reliance on the “domestic circulation” to expand consumption, investment, and government expenditures in the domestic demand market to respond to the uncertainty caused by the pandemic on the global economy. On the other hand, the “Outline” still emphasizes the active “domestic-international dual circulation” as a channel to influence the world economic order after the pandemic.

Self-development mainly responds to the potential impact of the possible targeted and tailored engagement by the U.S. in China’s economic, trade, and technological advancement. China continues to reorganize its scientific research institutions and reprioritize the development of critical technologies. On this basis of domestic innovation, China increases its investment and government spending on high-tech fields such as quantum and artificial intelligence, hoping that the increased value of strategic emerging industries would account for more than 17% of GDP.

On the other hand, the “Outline” also sends out the message of “self-reliance and self-improvement,” preparing a path for the decoupling of U.S. and Chinese technologies. In terms of investment and government expenditures, it also includes organically linking new infrastructure with the development of digital economy and the expansion of urbanization, expanding domestic demand internally and exporting to countries along the Belt and Road Initiative externally. It is committed to seizing the high ground of international standards, dominating the rule-making of cybersecurity, digital currency, and digital tax to further extend the China’s Internet sovereignty concept to construct the so-called “community of shared destiny in cyberspace.”

The “Outline” is relatively complicated and obscure when it comes to the goals of expanding domestic consumption. If domestic consumption and demand could successfully grow, it could at worst ensure self-reliance and self-development and at best reinstate the incentive for the U.S. and other countries to engage with China’s economy of large scale during the economic recovery after the pandemic. However, the magical success of the poverty alleviation project in early 2021 does not guarantee that disposable income per capita will automatically increase with the increase of income per capita, thereby promoting consumption. To increase the marginal propensity to consume, China also needs other supporting measures for housing reform, medical security, and elderly healthcare. These complex economic and social projects will be a major challenge for the Chinese Communist Party (CCP) to achieve the goal of modernization in its “14th Five-Year” governance.

In terms of geo-economics, Taiwan has benefited from the ongoing reshuffling of supply chains caused by the pandemic and the strategic competition between the U.S. and China. The semiconductor industry is especially critical for the world, and it’s naturally China’s main target to break through its technology of chip manufacturing. Stakeholders in Taiwan still have room for improvement in the protection measures for information security in terms of cyberspace and personnel control. In the legal system, much remedy is needed for the insufficiencies of the “Trade Secrets Act.” Drafting, executing, and complying with something similar to the U.S. Economic Espionage Act could be countermeasures worthy of consideration by all parties.

(Tseng Yi-Shuo, Head of the Division of Cyber Warfare and Information Security, the Institute for National Defense and Security Research.)

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