OREANDA-NEWS. November 03, 2015. The broad emphasis on reform and productivity growth that emerged from China's Fifth Plenum underscores that macroeconomic restructuring remains a core policy objective for the authorities, says Fitch Ratings. This is in line with Fitch's view for a protracted rebalancing, with growth slowing below 7% from 2015.

The Fifth Plenum meeting of the Communist Party of China's Central Committee concluded yesterday. The communique outlining the conclusions of the plenum was light on detail. But, it is notable that the broad thrust of the document focused on areas pertaining to macroeconomic reform and increasing productivity in the context of tightening constraints on human and natural resources.

Notably, the communique reaffirmed the goal to double the 2010 level of GDP by 2020. If interpreted in real terms, this would imply a growth rate of about 6.5% per year on average for the coming five-year plan period (2016-2020). From a growth perspective, it is also significant that the plan targets a substantial increase in the share of consumption. Fitch has long maintained that progress on rebalancing the economy away from capital investment toward a more sustainable consumption-led growth model would be positive for the sovereign credit profile.

Few details on specific policy changes were released, but some of the broader objectives listed could point to reforms. A target to accelerate urbanisation by increasing the share of registered residents is a case in point, which may imply further reform of the household registration system.

The communique also discusses "improving" the management of the state's capital as an objective. This could point to further reform of state-owned assets, but Fitch maintains that administrative reforms within the existing ownership model are more likely than widespread privatisation.

Demographic challenges and the constraints posed by an aging population are key issues raised by the communique, and the authorities have announced their intention to strengthen the social insurance system with an injection of state resources. This underscores how ageing is likely to exert an increasing drag on the fiscal position over the long term.

Replacing the country's decades-old 'one-child' population control policy with a two-child policy was also announced as part of the communique to address human resource constraints. But, the move to a two-child policy cannot avert the pressure on China's demographic position over the next 20 years - during which the UN projects the working-age population to drop to 65% in 2035 from 73% in 2015 (versus 60% in 2035 for high-income countries). It remains to be seen to what extent the new two-child policy will have on birth rates, considering the weak take-up for a second child under the previous system.

Further details on the next five-year plan should be available around the Central Economic Work Conference later this year leading up to its formal adoption by the National People's Congress in March.