In Depth: China Puts Industry, Consumers at Heart of Next Five-Year Plan

China’s economic blueprint for 2026-2030, approved at the Fourth Plenum of the Communist Party’s 20th Central Committee in October, aims to reorient policy focus on the real economy through industry modernization, stimulation of household consumption, and management of rising local government debt risks. The plan underpins China’s aspiration to become a “medium-developed country” by 2035, which necessitates doubling the 2020 per capita GDP and maintaining an average annual GDP growth rate of at least 4.17% over the coming decade, according to official guidance. This target is ambitious, given persistent structural challenges, including unbalanced development, insufficient demand, and difficulty in transitioning to new economic growth drivers. [para. 1][para. 2][para. 3]

To address these challenges, the five-year plan sets out a comprehensive strategy emphasizing both qualitative and quantitative targets. The strategy revolves around 12 priorities for areas such as industrial development, innovation, and market expansion. According to Morgan Stanley’s Robin Xing, the 15th plan strengthens and builds upon themes already established in the 14th plan but with critical new shifts, including a greater emphasis on a modern industrial system, household consumption, and—significantly for the first time—fiscal sustainability, particularly for addressing local government debt. [para. 4][para. 5]

A core pillar is modernizing industry. The new plan elevates developing a modern industrial system with advanced manufacturing as a cornerstone, reflecting concerns over deindustrialization seen in some global economies. China’s two-pronged approach includes upgrading traditional sectors (e.g., mining, chemicals, textiles, shipbuilding) to create approximately 10 trillion yuan ($1.4 trillion) in new market opportunities over five years, as declared by Zheng Shanjie, head of the National Development and Reform Commission. Simultaneously, the blueprint calls for cultivating emerging sectors, such as new energy, advanced materials, aerospace, and low-altitude economy (including drone delivery), and for pursuing breakthroughs in critical technologies like quantum computing, hydrogen energy, AI, nuclear fusion, and 6G. Technological self-reliance is a keystone, with “unconventional measures” planned for achieving breakthroughs in key areas (e.g., integrated circuits, basic software, advanced materials) to gain first-mover advantages, as emphasized by economist Guo Lei. [para. 6][para. 7][para. 8][para. 9][para. 10]

Simultaneously, the plan aims to unlock domestic demand by raising household consumption’s share of GDP, a longstanding weak point in China’s economic model. Initiatives include job creation, income growth, easier big-ticket spending (removing curbs on items like cars and homes), expanding consumer choice by reducing market barriers, and enhancing public services (e.g., increasing pensions, broadening free education, possibly extending compulsory education). Investment, too, will pivot towards projects improving social welfare. [para. 11][para. 12][para. 13][para. 14][para. 15]

Crucially, the blueprint injects fiscal discipline to confront local government debt risks. With slowing tax revenue but rising welfare and investment outlays, reforms will unify budget controls, improve debt management, and maintain a “reasonable macro tax burden”—not by broad tax cuts but by optimizing the tax structure, considering new taxes (carbon, digital assets) and phasing out outdated incentives. Asset activation—leveraging underused state assets via tools like real estate investment trusts—is also prioritized to improve returns and efficiency. [para. 16][para. 17][para. 18][para. 19]

Finance system reform is another key theme. The plan advocates strengthening systemic stability and support for the real economy, including establishing a macroprudential management system that separates monetary policy and financial stability functions, and enabling targeted liquidity support for nonbank financial institutions—a move highlighted by central bank chief Pan Gongsheng as vital to forestall crises. There’s also renewed emphasis on leveraging finance for technological progress, green development, inclusive and digital finance, as well as expanding direct financing avenues through stocks, bonds, derivatives, and asset-backed securities. [para. 20][para. 21][para. 22][para. 23]

Contact: Michael Bellart (michaelbellart@caixin.com) [para. 24]