 China's new five-year plan exposes the wishful thinking behind socialist regimes. By Mark A. DeWeaver, an audio-mesist wire narrated by Michael Stack. On October 29, the 19th Central Committee of the Chinese Communist Party concluded its fifth plenum, a four-day meeting devoted primarily to laying the groundwork for China's 14th five-year plan, which covers the period from 2021 to 2025. Most of what has been made publicly available about the planner's thinking is hardly novel. No one would have been surprised to read that they plan to hold high the banner of socialism with Chinese characteristics, for example. But one thing in particular stands out. The hope that the country can become less dependent on the outside world, both for advanced technology and as a source of final demand. Given China's steadily deteriorating external relations, it is easy to see why moving toward autarky might seem desirable. But in the absence of a reduction in the state's role in the economy, something that is clearly not under consideration, policy is designed to stimulate innovation and household spending are unlikely to succeed. Mal-incentives generated by the state sector have always been the obvious obstacle to socialist countries' efforts to achieve technological breakthroughs. State-owned enterprises have only weak incentives to innovate because they face almost no bankruptcy risk. At the same time, for both state-owned enterprises and private companies, competition under socialism manifests itself mainly in the endeavors of people to court the favor of those in power. As Mises wrote in 1940, rather than in attempts to build a better mousetrap, the system incentivizes rent-seeking, not tech entrepreneurship. Increasing research and development budgets or encouraging the re-innovation or co-innovation of foreign technology, all priorities dating back to the mid-2000s, have done little to strengthen China's capacity for indigenous innovation. The Chinese economy continues to rely almost entirely on foreign intellectual property, whether acquired by fair means or foul. Even the four new inventions, trumpeted by the state media as the country's contribution to the modern world, were all actually invented elsewhere. Japan has been running high-speed trains since 1964. Mobile payments were introduced by Apple in 2014. Internet e-commerce began with Amazon and eBay in 1995, and bike sharing started in Copenhagen also in the 1990s. Replacing exports with local household consumption will also be a non-starter. Chinese household spending is low not because households are frugal, but because such a large share of the national income pie is attributable to the state. While in theory, the state's assets are the collective property of all citizens, in practice ordinary people have no meaningful claim to the income they produce, which instead serves as a funding source for government projects and or lines the pockets of the well-connected. The government has in effect crowded out the consumer, a situation that can hardly be reversed, while at the same time following the socialist road. The trouble with China's new five-year plan is that it attempts to solve problems while leaving their underlying structural causes unaddressed. In this, it is not unlike the final Soviet five-year plans of the 1980s, which were also supposed to boost innovation and household consumption in the absence of any real system reform. The 11th Soviet plan promised a switch over to efficiency and quality on the basis of the universal introduction of fundamentally new machinery and materials. Just as the new Chinese plan calls for, improving economic quality, efficiency and core competitiveness through the development of strategic emerging industries. Concrete concern for concrete people was to be the alpha and the omega of Leonid Brezhnev's economic policy. The communique issued at the conclusion of last month's 5th plenum makes a similar promise, asserting that benefiting the broad masses of the people would be the point of departure in the end point of development. China today is of course in a much better position than the Soviet Union ever was to make progress toward these objectives. Yet the basic problem remains the same. The distortions resulting from the state's economic interventions cannot be overcome as long as these interventions continue. Any attempt to be self-reliant in key technologies will either have to be abandoned or leave the country struggling to keep up with the rest of the world. Nor can local markets be expected to replace the country's current massive export volumes. A move toward autarky would be a move not toward increased domestic consumption, but toward Mao era poverty. For more content like this, visit Mises.org.