Chinese President Xi Jinping sets the tone for China's 2026-2030 Five-Year Plan. Image credit: South China Morning Post
China’s officially owned Xinhua News Agency reported that President Xi Jinping, also the party’s general secretary, delivered a work report and briefed members on the preliminary outline of the next Five-Year Plan. The session in a closed room will probably conclude Thursday with a communiqué summarizing its key findings.
The second-largest economy in the world, that of China, is slowing down as a deep property crisis, weakening domestic demand, and mounting US trade and technology restrictions weigh on growth.
The authorities face a delicate balancing act between furnishing home consumption and fuelling industrial self-reliance, particularly in semiconductors, AI, and clean energy, sectors seen as key to China’s “national rejuvenation.”.
The mood among Chinese private consumers and private households is extremely negative,” said Alexander Brown, a China analyst at the Mercator Institute for China Studies (MERICS) in Berlin. “But Beijing will be spending its money primarily on industrial policy in the context of the geopolitical landscape and its goal of resilience.”
Tech Self-Reliance Over Consumption
US President Donald Trump’s new tariff threats and continued restrictions on high-tech chip exports have further galvanized Beijing’s pursuit of technological independence.
“Manufacturing is still China’s priority number one,” said Chen Bo, a senior research fellow at the National University of Singapore’s East Asian Institute. “In times of conflict, manufacturing really matters more than services.”
But specialists caution that placing too much emphasis on industrial policy might be at the cost of domestic consumption, already far behind Western economies, where consumer spending accounts for most of the growth.
Private spending accounts for just 40% of China’s GDP, compared with 60% in Europe and 70% in the United States.
To meet that shortfall, Beijing has introduced modest measures, consumer subsidies, pension increases, childcare allowances, and social security reforms but economists believe they are not enough to deliver the huge fiscal splurge needed.
Citigroup estimates that China must invest 20 trillion yuan ($2.81 trillion) over the next five years about 15% of GDP to rebalance its economy towards domestic demand.
“If you can only rely on external demand and domestic demand doesn’t work, then you will have employment problems and deflation,” Macquarie Group chief China economist Larry Hu said. “In the long term, that’s definitely going to be a challenge.”
The plenary session will help determine the tone of China’s 15th Five-Year Plan, the economic guide that will lead the nation through the rest of the decade.
Western politics regarding election cycles, but policymaking in China is done on planning cycles,” said Neil Thomas, a fellow of Chinese politics at the Asia Society Policy Institute. “Five-Year Plans provide a sense of direction the leadership would like and realign the state’s resources in that direction.”.
The meeting also comes amid a corruption crackdown targeting senior military and party officials, underscoring Xi’s broader campaign to consolidate political control as he steers China through economic uncertainty and global competition.
Reform to High-Tech Powerhouse
Since Deng Xiaoping’s 1978 reforms, China’s Five-Year Plans have transformed the nation from a planned economy into a global manufacturing and technology powerhouse. The “reform and opening-up” policies of the early 1980s unleashed growth, while later plans emphasized green energy, electric vehicles, and digital infrastructure.
Today, Xi’s focus has shifted toward what he calls “new quality productive forces”, a vision that marries industrial modernization with national security and technological independence.
“National security and technological independence are now the defining mission of China’s economic policy,” Thomas said. “The goal is to ensure China is never again dominated by foreign powers.”
While the official Five-Year Plan will be finalized in 2026, this week’s plenary is likely to reaffirm Xi’s core priorities:
Developing innovation in semiconductors, artificial intelligence, and renewable energy. Diversification from Western technology and supply chains, and increasing domestic consumption through incremental social reforms. Maintaining political stability in the face of corruption and demographic challenges
A communique of the meeting will be released Thursday.
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