By Ruma Dubey

Yesterday, China unveiled its Economic Blueprint for 2016. It follows the 5-year Plan, something like India’s 5-year plan. And yesterday it announced its 13^th Five-year plan, 2016 to 2020. The tone of this plan is once again that of keeping up the momentum of this transition which the country is going through – becoming more consumer driven.

The message which came across loud and clear was that China will not depend on fiscal measures to boost capital investments, exports and consumption; instead it will concentrate on the boosting the supply side, phasing out outdated businesses.

When we say ‘supply side’ what we mean is shedding excessive industrial capacity and use innovative measures to improve growth – like sale of empty houses to rural, migrant workers at subsidized rates. This means it is looking at reducing the massive housing inventories as a major step forward. Thus the entire guidance for the next five years in China will essentially be only supply-side reforms. This is a huge change for a country which for the past so many years has looked at managing only demand-side, concentrated only on exports and pumping in massive investments. Today, as the economy has slowed down, exports also losing momentum, it is staring hard at all the huge facilities it built up in trying to become the “factory of the world”. This has created a huge social imbalance in the country and hopefully, all its policy actions will now directed to bring in this sense of balance.

The Chinese Govt expects sectors directly related to consumption like medical, healthcare, retail, logistics to all get major impetus in the coming years. The Govt’s reform process will essentially concentrate on urbanization, industrial upgrading, financial liberalization and green investments. One cannot help but feel that all this sounds so familiar, something which our PM has also been stressing upon. But the big difference here – China is looking at investments from within the country unlike India which is depending more and more on FDI thereby opening ourselves up to more risks of global turmoil.

Typical of China where transparency is non-existent, these economic reform plans were not disclosed publicly. Even the state media gave some vague, nondescript sound bytes about what lay ahead. But the overall message one could infer was that China was throwing out its older model of growth, was now trying to find new tracks of growth. The mounds of factory goods, the various ghost towns and simmering social unrest, have all finally forced the Chinese Govt to rethink.

The Economic Blueprint did set out a growth target for 2016 but this number was not disclosed; will be revealed only in March. It is expected though that GDP target would be much lower than 2015’s around 7% target. It is widely talked that China could end 2015 with the slowest GDP growth posted in the past 25 years; it might be a struggle to reach even 7%.

And yes, China’s debt is gargantuan- corporate debt stands at 160% of its GDP, up from 98% in 2008. The country now realizes that it cannot merely provide any more fiscal stimulus; it is so leveraged that it first needs to cut down this debt.

There are three more things which China plans to do and which India needs to sit up and take notice – firstly, it wants to shrug off its poor quality tag and become like Japan and Korea; China wants to move up the rung on the quality ladder. Secondly, it has realized that it needs to take the environment more seriously – it plans to invest big time in electrical car technology. Thirdly, its aim is to lift some 70-80 million people currently living below the poverty line – that too within the next 5 years. Yes, it will extend free, compulsory education to all till age of 12 years.

Yes, China is going through a change; it is trying to adapt. It will take a while for a big train to change course.

In the midst of all this, one cannot help but think that ‘Make in India’ especially after the way China has suffered is not such a good idea after all. As we say again and again, we reiterate again, let’s make India the brain of the world – an R&D and innovation hub and not a mere mindless factory place. This is the lesson we need to learn from China’s tryst with growth.