Why Beijing still loves its five-year plans

0:02Good morning from the Financial Times. Today is Monday, October 20th, and this is your FT News briefing. President Trump's latest meeting with Vladimir Zelensky was a bitter pill for the Ukrainian president. And Chinese officials are cooking up their next five-year plan. Plus, investors are really digging rare earth stocks. I'm Jess Smith, and here's the news you need to start your day.

0:34U.S. President Donald Trump told Ukraine's President Vladimir Zelensky to accept the Kremlin's terms or be, quote, destroyed by Russia. That's the latest detail the FT is reporting about Friday's White House meeting between the U.S. and Ukrainian presidents. Zelensky had traveled to the White House to try and secure new long-range Tomahawk missiles. But the meeting descended into a shouting match, according to officials familiar with the matter. Trump told Zelensky to surrender Ukraine's entire Donbass region to Russia as part of an effort to end the war. The day before the meeting, Trump spoke with Russian President Vladimir Putin on the phone, and the two are set to meet in person this week in Budapest.

1:24Hundreds of China's top officials are locked in a hotel in Beijing, and by the end of the week, they'll emerge with the country's next five-year plan. Some say these five-year plans are a relic of China's former command economy. Russia abandoned them after the collapse of the Soviet Union. But others say they still serve a purpose. Here to explain why China is sticking with its five-year plans is the FT's Shanghai correspondent, Thomas Hale. Hey, Tom. Hi there. Thanks for having me. So, Tom, what's been the purpose of these five-year plans? So these five-year plans, the first of which was in 1953, and we're now on the 15th, are remarkably consistent over the years, despite the many changes in China's economy.

2:08And they ultimately amount to an attempt from the party to kind of map out the loose trajectory of the next half decade. Of course, they can't know exactly what's going to happen, both internationally or domestically over that period. But the idea is to give some kind of guidance to the various organs and really the entire economy within the country as to what the expectations are for that period. So as for the five-year plan that's in the works this week, what do you expect will be in it? Do you have a sense of the outline or key themes? Well, I think the first point to make is that these plans are often very thin on detail, pretty much by design.

2:47And part of the reason is that they need to cover such a vast and unpredictable area. I think we're really looking for how China pushes ahead with its longstanding efforts to upgrade its industrial sector, which are, you know, part of the reason that we've seen these trade conflicts really is China beginning to compete more in terms of higher manufacturing with Western economies. And also, you know, the property slowdown in China, which began four years ago now, is proving very resistant to policy efforts. So I think if they mention property, it will be notable. And if there is no mention at all of property, I think that will also be quite telling as well.

3:27So obviously, they're going to be forward looking and dealing with things like high tech manufacturing. But five year plans do feel like a vestige from another time. China's economy is so much more market-oriented now. So why is Beijing still so keen on these plans? You've pinpointed one of the many contradictions that run through modern China, really. I think ultimately there is, in China now maybe more than ever, a very strong desire for stability. And I think the consistency and the repetitive nature of these plans is seen internally as part of the architecture of stability. a lot of things that we see that have echoes of, you know, that pre-opening up era in China, that pre-1979 reform era, the pre-1990s that we often get a flavor of, just speaks to the importance of keeping the kind of political framework and the political architecture consistent.

4:22And the critics of five-year plans, what do they say? I think the critics would say that it's ultimately outdated, that, you know, as China has shifted more towards a market economy, certainly than it was three, four decades ago, there is a mismatch in attempting to plan the economic trajectory to the extent that appears to be happening. But one thing to make clear, both in terms of what might be said in favor of such plans and what might be said as criticisms, is that in both cases, there is a certain degree of uncertainty about what really goes on behind closed doors in this hotel. I think ultimately these plans can be understood and should be understood within the context of a policy approach that does rely heavily on signaling rather than necessarily being able to control exactly what happens on the ground, given the variation across China's many different provinces and given the kind of diversity of what's going on that is somewhat masked by these types of, you know, high-level Beijing events.

5:25Thomas Hale is the FT's Shanghai correspondent. Thanks, Tom. Thank you.

5:36Global hedge funds are excited again about Hong Kong's stock market. Funds are joining IPOs as early investors at the fastest rate since 2021. They include big names like Millennium and Oaktree. Recent listings in Hong Kong include big mainland companies like Zijin Gold and CATL. That's the world's largest EV battery maker. Their IPOs jumped sharply on the first day of trading, meaning early investors could quickly pocket big profits. And Hong Kong's hot streak may just be getting started. There are 300 more IPO applications in the pipeline, making Hong Kong likely to claim the top spot for global listings this year.

6:23shares in u.s listed rare earth companies have hit record highs rare earth minerals are critical for industries like energy and defense and after the trump administration said it would boost support for rare earth companies investors piled in here to tell us more about what's going on is the FD's commodities correspondent, Camilla Hodgson. Hi, Camilla. Hi, good morning. So how big of a surge in share prices are we talking about? So the numbers are pretty big. We've seen companies like MP Materials, which got a US government deal this year, and others like USA Rare Earth and the Australian company Linus, roughly more than double their share prices in the year to date.

7:05And we've seen some other companies like Energy Fuels, which is an American uranium and rare earths miner, their shares have gone up almost 300 percent. So some really significant moves. Could you back up for a second and just remind us why the Trump administration wants to support these companies? So the history here is that China is very dominant in rare earths and other critical mineral supply chains, which puts them in a position of power, obviously. And they've been wielding that power. We've seen various export controls introduced. And that really cripples or has the potential to cripple industry in the Western world because China can turn the taps on and off essentially of these materials that everybody needs for things like permanent magnets that go into wind turbines, electric vehicles.

7:51And so Trump, in response to that, is keen to bolster the domestic critical minerals industry. So everything from rare earth mining to processing to magnet manufacturing. The whole supply chain really is what he and the U.S. administration is looking to build up. And what exactly is the U.S. government doing to help its rare earth companies? Well, it's a range of things. The most notable deal this year has been the 400 million deal that the U.S. government did with MP Materials. And that really runs the gamut of options here. It includes the government taking equity in the company. It's also helping to finance the construction and expansion of its facilities.

8:35And it's also basically guaranteeing a price for the rare earth materials that MP produces and sells. So there's a range of options here at the government's disposal. It's not going to do all of those things for all the potential companies. But we have seen the administration move to either facilitate loans, speed up permitting, and potentially take equity stakes in companies as well. So it looks like a good time to be in the industry, but are there risks for investors who want to buy shares in these companies? Yes, absolutely. I mean, when it comes to investors, there is a lot of frothiness in this market.

9:10There are suddenly a lot of players out there that are talking a big game about rare earths. And you really have to dig into the details to see whether they are operational mines, whether they actually produce anything. This is something that analysts have pointed out because really the global market for Red Earths is not enormous. It's very much concentrated in China, but there's only so much demand for this material at present. And there are only so many operational producing companies. So while this is a great moment for potential producers to get financing, what some analysts have said is just be wary and do your homework because it's kind of edging towards bubble territory.

9:47Camilla, what are your thoughts more broadly on how the U.S. administration's supports and Chinese export controls are going to shape the industry? Well, that's really the million-dollar question. What the U.S. and other Western governments would like is to kind of realign rare earth supply chains and wrest the control out of China's hands. I think that's not necessarily to say having an entirely ex-China supply chain. Lots of companies are saying we need to still work with Chinese companies. but just to redress the balance somewhat so that it's not a market that is almost completely dominated by China.

10:23Whether that comes to pass really remains to be seen. It takes a very long time to open new mines. It's not quick to build processing facilities. And also importantly, a lot of the expertise is in China. So the West has a lot of catching up to do just in terms of knowledge. Camilla Hodgson is the FT's commodities correspondent. Thanks, Camilla. Thank you. Before we go, I want to let you know about a special deal for news briefing listeners. From now until October 29th, you can save 40 % on a digital subscription. That's access to all the Financial Times reporting. Just go to ft.com forward slash briefing sale.

11:03Again, that's ft.com slash briefing sale. We'll also have a link to that in our show notes. You can read more on all these stories for free when you click the links in our show notes. This has been your daily FT News briefing. Check back tomorrow for the latest business news.