In Depth: Key Challenges China’s Next Five-Year Plan Needs to Tackle

China is in the process of developing its next national Five-Year Plan (FYP) for economic and social development through 2030, a crucial task amidst global instability and weak domestic demand. This upcoming 15th FYP aims to balance domestic and international uncertainties while advancing the nation’s goal of achieving “socialist modernization” by 2035. The plan is expected to focus on high-quality development, the dual circulation strategy, technological advancement, and innovation-led growth [para. 1][para. 2].

To gather expert opinions on these challenges and priorities, Caixin consulted five leading economic policy advisers: Yang Weimin, Huang Qunhui, Xu Lin, Wang Dehua, and Wang Yiming, who hold distinguished positions in government, academia, and policy research institutions shaping China’s economic strategies [para. 3].

Internationally, the plan must contend with three trends outlined by Wang Yiming: intensified global competition for tech leadership; accelerated restructuring of global industrial and supply chains, prioritizing security and stability over cost; and rapid changes in global governance with emerging multilateral frameworks. In response, expanding domestic demand, particularly household consumption, is identified as the key driver of growth. Achieving this entails boosting the household share of national income through reforms in wage distribution and increased fiscal outlays on public services and welfare [para. 4][para. 5].

Domestically, the economy faces structural shifts noted during the 14th FYP (2021-2025): waning traditional growth engines such as real estate, the need to foster emerging innovation-led sectors, and major demographic changes. Since 2022, China’s population has been declining, reducing the working-age population and pushing up labor costs, with an aging society increasing burdens on families and social systems, thus dampening consumption and constraining growth [para. 6][para. 7][para. 8].

The government acknowledges that weak domestic demand is now the primary contradiction, whereas previous plans focused on supply and investment. Achieving the 15th FYP’s target of ~5% average annual GDP growth will require about 38 trillion yuan in additional demand, challenging under uncertain export prospects and slowing fixed-asset investments. Thus, stimulating consumption—especially household consumption—has become a central government focus [para. 9][para. 10][para. 11][para. 12].

Despite strong manufacturing (nearly 30% of global value added in 2023), China’s household consumption remains low, accounting for just 39.1% of GDP in 2023 versus 67.9% in the U.S. and 55.6% in Japan. The share of income accruing to households is limited, and wage growth for low earners lags. Experts argue for government-driven redistribution policies and fiscal support for public services like health care, pensions, education, elder care, and affordable housing to boost income and thus consumption. Equalizing public services across regions and between rural and urban areas is seen as essential though challenging [para. 13][para. 14][para. 15][para. 16][para. 17][para. 18].

Further, the consumption-driven focus should emphasize the underdeveloped services sector—at 56% of final consumption, still lagging developed economies—and improving accessibility, quality, and affordability. Raising household consumption to above 50% of GDP by 2035 could greatly stabilize China’s economy [para. 19][para. 20].

On the supply side, the FYP will continue advancing supply-side structural reform, shifting from labor- and capital-driven growth to greater efficiency and technological progress. An updated “new whole-nation system” is proposed, combining centralized state leadership with market mechanisms and private sector engagement, particularly to resolve overcapacity and foster innovation. This approach aims to curb “involution-style” competition, seen in industries plagued by price wars and eroded profitability, such as solar panels and electric vehicles [para. 21][para. 22][para. 23][para. 24][para. 25][para. 26][para. 27][para. 28][para. 29][para. 30].

In sum, experts agree that boosting household income, rebalancing supply and demand, deepening fiscal reforms, and stimulating new productive forces are vital for China’s next phase of high-quality, innovation-led growth [para. 31][para. 32].