The high stakes for China’s Five-Year Plan

China’s leaders concluded their discussions on the 14th Five-Year Plan today. The initial post-meeting communique offered few new details but more may be revealed at a press conference tomorrow. The priorities the Plan sets will shape the country’s growth trajectory for years to come. In recent decades, China has followed the path of rapid convergence with developed economies laid down by the other Asian growth stars – Japan, Korea and Taiwan. But there is no guarantee that this will continue. As Chart 1 shows, convergence is the exception among EMs rather than the norm. And while Japan, Korea and Taiwan were able to leverage rapid export growth to climb the income ladder, this model is reaching its limits at a lower income level for China, due to its sheer size and the headwinds caused by decoupling with the West. As a result, the need for reforms to help unlock new domestic sources of growth is more urgent than ever. Without faster progress in addressing structural problems, we think growth could slow to just 2% by 2030.