What China Should Target in Its 15th Five-Year Plan (AI Translation)

【周刊提前读】外部环境纷扰国内供需变局 “十五五”规划目标如何设定

The year 2025 marks the conclusion of China's 14th Five-Year Plan (“十四五”) and the initiation of the 15th Five-Year Plan (“十五五”). The next planning cycle is underway, with President Xi Jinping emphasizing the importance of anticipating and proactively responding to international changes, especially as the external environment becomes more uncertain and complex. Notable external factors include rapid technological advancements, industrial supply chain reconfigurations prioritizing security, and shifts in global governance structures. These uncertainties require China’s new plan to not only pursue modernization and high-quality development but also prepare for emerging risks and challenges. Experts suggest the 15th Five-Year Plan focus more strongly on stimulating domestic demand, especially consumption, by increasing household incomes, reforming income distribution, and creating policy stability to boost confidence among businesses and consumers [para. 1][para. 2][para. 3].

Recent macroeconomic policy since late 2024 has increasingly favored social welfare and consumption over capacity-expanding investments. These policy shifts are considered adaptations to unprecedented global changes and adjustments to China's development stage. The plan seeks to not only push innovation on the supply side but also better align with evolving domestic demand, requiring more detailed and accelerated reforms in taxation, markets, and national unification of standards [para. 4][para. 5][para. 6].

In assessing the achievements of the 14th Five-Year Plan, official reports show most targets have been met or are on track, with notable successes in urbanization, pension participation, water quality, and energy production, but some lag in reducing energy consumption and carbon emissions per GDP. From 2021 to 2024, China’s GDP growth averaged 5.5% annually, surpassing global averages, but experienced volatility due to factors like the COVID-19 pandemic. Major structural changes include the slowing of traditional growth engines such as real estate, the rise of new industries like electric vehicles and renewables, and demographic shifts including population decline and aging. Experts warn that negative population growth is reducing labor supply and changing consumption patterns, making internal demand a persistent constraint on growth [para. 7][para. 8][para. 9][para. 10][para. 11][para. 12][para. 13][para. 14][para. 15].

Moving into the 15th Five-Year Plan, growth targets must align with the long-term 2035 goal of achieving mid-sized developed country status in terms of per capita GDP. Growth targets, while challenging, must remain realistic and aim for high-quality development characterized by structural optimization and reduced emissions. Some suggest slightly lowering growth expectations due to declining potential growth rates and increased external headwinds [para. 16][para. 17][para. 18][para. 19][para. 20].

A pivotal area is boosting domestic consumption. China’s resident consumption rate lags significantly behind developed countries, with recent declines driven by both income distribution issues and weakening consumption propensities. Policy directions include increasing incomes, especially for lower- and middle-income groups, and expanding public investment in social services such as education, healthcare, and elderly care. Consumption of services, though growing, remains comparatively low and needs improved supply, quality, and affordability. The plan should support service sector innovation and deregulation to meet evolving demand [para. 21][para. 22][para. 23][para. 24][para. 25].

On the supply side, the focus remains on innovation-driven restructuring and addressing overcapacity, especially as China enters a more service-oriented, post-industrial stage. Enhancing research and development intensity (which reached 2.68% of GDP in 2024) and leveraging a “new whole-nation system” that more actively involves market mechanisms is seen as crucial. Addressing severe competition in some high-growth sectors and realigning industrial priorities toward consumer-oriented and high-end industries are also emphasized [para. 26][para. 27][para. 28][para. 29][para. 30][para. 31].

Ultimately, both supply and demand reforms require deepened market-oriented reforms and greater openness. Policymakers are urged to clarify government-market relations, refocus public resources on welfare and strategic areas, and experiment with high-standard institutional opening in regions such as Hainan. Expanded, rules-based international engagement is seen as vital for China’s sustainable and quality growth during the 15th Five-Year Plan [para. 32][para. 33][para. 34][para. 35][para. 36][para. 37].