(Oct 23): China vowed to seek technological self-reliance and grow the domestic market in the next five years, as it looks to both insulate the economy from foreign pressures and build a sustainable engine for growth.
The country will aim to “greatly increase” the capacity for self-reliance and strength in science and technology, according to a communique released on Thursday by state broadcaster CCTV after a four-day conclave of the Communist Party’s Central Committee.
Initial details of the approved proposal place a heavy emphasis on high-quality development and the role of technology in developing “new-quality productive forces” which refer to advance fields such as semiconductors and artificial intelligence. The statement also stressed needs to building a modern industrial system and strengthen innovation in core technologies.
This reflects Beijing’s drive to boost productivity and achieve self-sufficiency in the face of an ageing population and Western restrictions on high-tech exports.
At the same time, the document reiterated a pledge to bolster domestic consumption and expand investment, vowing to “firmly eliminate clogs hindering the building of a unified national market”.
Economists have long seen increasing demand at home as critical for rebalancing the economy away from its reliance on exports and debt-fuelled investment, although any new policy measures are expected to be announced later.
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The FTSE China A50 Futures held steady after the readout was released. The yuan and the yield on China’s 10-year government bonds were little changed.
This intensified focus on technology builds on a strategy set in 2020, when the last five-year plan was announced after US President Donald Trump’s first term. That drive has only become more urgent, as Washington now seeks what it calls “a strategic decoupling” from China, targeting a broader range of sectors from semiconductors to pharmaceuticals and sanctioning a growing number of Chinese firms.
China is under pressure to change its growth model as the manufacturing powerhouse faces rising tariffs from the US and pushback from other trading partners over a deluge of Chinese exports. Net exports make up an increasing share of the economy’s expansion in recent years while consumption has diminished.
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The country needs to speed up the building into a power of manufacturing, quality, aviation, transportation and internet and maintain the share of manufacturing in the economy at a “reasonable” level, according to the communique. Quality and efficient growth in services will be promoted and a modernised infrastructure system will be constructed, it said.
As trade headwinds grow, Chinese households would need to spend more to help absorb the country’s excess manufacturing capacity and break a record deflation streak. Economists and some foreign officials, including US Treasury Secretary Scott Bessent, have urged Beijing to use the plan to strengthen its social safety net and unleash household spending.
The readout pledged to “increase efforts to guarantee and improve people’s livelihood” and “improve the social security system”. It also promised to “promote the high-quality development of the real estate sector”, affirming officials’ efforts to stabilise the critical industry linked to the bulk of household wealth.
Analysts and investors will be scouring the full five-year plan, expected at an annual legislative meeting in March, for specific fiscal commitments to back this up.
“What really matters is how forceful policymakers will execute these goals,” said Michelle Lam, a Greater China economist at Societe Generale SA, citing raising pension payments as an example.
While the plan focuses on the long term, the communique also sent a strong signal for the short-term, vowing that macro policies will be strengthened at the appropriate time to support the economy.
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Economists broadly expect growth to decelerate in the coming years as Beijing searches for a new, more stable model for expansion.
Policymakers are likely aiming for an average annual growth target in the range of 4.5% to 4.8% for the 2026-2030 period, according to analysis from firms including Macquarie Group and Standard Chartered plc. China’s economy is on track to have grown at an average of 5.5% annually during the five-year period ending in 2025, according to previous government estimates.
A central challenge in hitting that goal is China’s stubbornly weak household spending, which made up only about 40% of gross domestic product (GDP) last year. That figure has barely budged from its 2019 level, before the pandemic stalled what had been a rising trend.
Some economists are calling for dramatic reforms to unlock that spending. Morgan Stanley’s Robin Xing has advocated for a multi-year, “full-scale” social welfare reform, arguing it could unwind an estimated 30 trillion yuan (US$4.2 trillion) in excess household savings.
Such a move, he estimates, could lift private consumption’s share of GDP by 1.6 percentage points by 2030. Economists at UBS AG, including Ning Zhang, suggested the government could take a simpler first step: setting an explicit official target for the consumption share of GDP.
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