China publishes outline of upcoming five-year plan

The late October plenary session of the Central Committee of the Communist Party of China considered recommendations for the upcoming 2026–2030 five-year plan. While official approval of the country’s 15^th five-year plan will not take place until the spring 2026 National People’s Congress, no major changes are expected at this point. Industrial modernisation, technological advancement, reduction of dependence on the West and resilience remain at the core of China’s economic strategy. Generous support is likely for targeted industrial branches, including microchips, industrial machine tools, high-end equipment, basic software, advanced materials and biomanufacturing. The proposal calls for strong support for emerging technologies such as quantum computing, biomanufacturing, hydrogen economy, nuclear fusion, brain-computer interfaces, embodied AI and 6G wireless networks. At the same time, the government seeks to strengthen the self-sufficiency of industrial production chains and secure international transport routes important to China.

Although industrial policy seems to be at the heart of the next five-year plan, the recommendations also refer to the need to make domestic consumer demand the driver of economic growth in the coming years. In addition to targeting more government spending at households, the social security safety net is planned to be strengthened and basic public services should be offered to those domiciled elsewhere under the household registration system (hukou), and make it easier to transfer the household’s hukou domicile. Moreover, the decision to start a family and families with small children are planned to be supported in a variety of ways. The draft five-year plan calls for full employment, indicating that more support to bolster employment is contemplated. The plan notably proposes implementation of collective wage bargaining and calls for the dismantling of commercial barriers between China’s provinces and cities.

The plan reiterates the target of raising living standards in China (GDP per capita) to the mid-level of developed economies by 2035. Although no growth figure is specifically mentioned, calculations suggest that the target would require average GDP growth of at least 4.2 % a year over the coming decade. Given China’s current economic structures, this growth target is extremely ambitious. Setting an excessively high GDP growth target could incentivise short-sighted growth strategies similar to those seen in last decade. When local government officials obsessed on policies geared to hitting the annual GDP growth target, many poured huge amounts of investment into projects of questionable profitability. These same local governments now find themselves deeply in debt and struggling with the collapse of the real estate bubble.