China’s next Five-Year Plan: what’s in store?

China’s leaders met in mid-October to discuss the blueprint for the direction the country’s economy will take into the future. The meeting of the Central Committee of the Communist Party saw them finalise the next Five-Year plan that will provide the clearest idea yet of how China sees its near-term path.

The plan, the 15th since the party gained power in 1949, encompasses all the main themes that the party is focused on. For many outsiders, planning an economy the size of China’s in such a rigid manner may seem unusual, yet it is in line with the core ideology of the party, which sees its role as overseeing all elements of economic and social activity in the country.

“The FYPs may seem arcane to outsiders, but in a world marked by growing volatility, they remain essential to Chinese statecraft and policymaking,” says Guo Shan, a partner at Shanghai-based Hutong Research. “They serve as an important instrument for Beijing to signal its future priorities and are an opportunity for businesses to structure their own plans.”

Few policy documents in China are as important and far-reaching as the FYPs, a line of expansive blueprints which map out the country’s economic, industrial and social development for more than seven decades.

“The FYPs are a critical part of China’s system and how the economy is mobilized. Objectives set from the top filter through to business, local governments, politicians and households, acting as guides for resource allocation and efforts over the next five years,” says Rory Green, chief China economist for GlobalData TS Lombard.

High five

The Party holds firmly to the view that the FYPs and strong central control are fundamental to China’s success.

“Formulating medium- and long-term plans to guide economic and social development is a key governance approach of our party… contributing to China’s unprecedented miracles of rapid economic growth and long-term social stability,” Party journal Qiushi quoted Xi as saying in mid-June.

A communiqué announcing the new plan reiterated a longstanding goal for China to achieve “socialist modernization” by 2035. What this precisely means is left vague, but the goal clearly is to stabilize the economy, provide stimulus to consumer spending and stress the development of new technologies.

“As the first FYP drafted after the Third Plenum in July 2024, it will serve as a framework to trial selective reforms,” says Guo. “But given that the Third Plenum focused heavily on institutional discipline and governance mechanisms, any reform initiated under the 15th FYP is expected to start with localized experimentation rather than sweeping structural shifts.”

As the current FYP period comes to a close, most observers have concluded that the plan has achieved at least some of its outcomes. China appears to have met the basic economic goal set in the 14th FYP, with the State Council announcing in late October that the country was on track to meet its GDP goals of ¥130 trillion by year-end.

“Scientific and technological self-reliance were goals built into the 14th FYP, to cut China’s reliance on foreign technology and dependence on imported resources as quickly as possible,” says George Magnus, a research associate at the China Centre of Oxford University and author of Red Flags: Why Xi’s China is in Jeopardy.

Other key focuses of the plan included a move toward high-quality manufacturing and self-sufficiency, with lower-level objectives being continued urbanization, greater innovation and an improved environment.

“I have to say I think the 14th FYP has generally been quite successful,” says Green, adding, “Whisper it quietly, but the restructuring of China’s political economy that began in 2012 and then accelerated in 2020 and throughout the 14th FYP has been pretty successful, although growth has slowed.”

“The economy has rebalanced towards advanced manufacturing and has a much smaller property element,” says Green.

“More productive investment has come through less debt-fueled growth. Then the self-reliance and the technology sides have been hugely successful,” he adds.

One blemish is that China is likely to miss its 14th FYP target to cut carbon emission intensity—emissions per unit of GDP—by 18% during 2021-2025. The world’s top carbon polluter is on course to achieve only a 12% reduction, so steeper reductions will be required in the 15th FYP to hit the country’s headline climate commitment for 2030.

What’s the plan?

The 15th FYP comes at a crucial juncture for China’s economy, which the World Bank said in December is continuing to battle headwinds, such as a moribund housing sector, brittle confidence, a soft labor market and trade policy uncertainties. In the coming months, questions will no doubt swirl around the upcoming FYP’s specifics.

The FYP draft suggests that the key focus for policymakers in the upcoming plan will continue to be modernization, innovation, self-sufficiency and boosting domestic demand.

Cultivating ‘new quality productive forces’ sits at the heart of China’s pursuit of a more resilient, forward-looking economic structure amid growing uncertainties. The concept covers high-tech manufacturing, green energy industries and cutting-edge technologies that will be mission-critical for a future economy.

These forces factor into a number of priority themes for the 15th FYP, chief among them technological self-reliance and innovation, which the Committee’s recommendations placed at the structural center of ‘Chinese modernization’.

“It’s about elevating science and technology from an enabling factor to the foundational pillar of national development. This framing marks a conceptual tightening compared with the 14th FYP, where technology supported ‘high-quality development’ but did not define it,” says Guo.

This reflects a conviction in Beijing that technological breakthroughs are now critical to national competitiveness, governance legitimacy and geopolitical resilience, according to Guo.

Consumption gains new prominence in the document, reflected in renewed zeal for growth over security and control issues.

“The need to drive domestic consumption is increasingly clear, and I think one that is recognized by Beijing. If one assumes that China has a minimum level of growth that the Party believes is necessary to maintain social stability, to achieve technology objectives, and maintain geo-economic power, consumption is the only remaining driver that can really deliver growth sustainably,” says Green.

Deepening technological self-reliance aligns with other highlights of the 15th FYP, such as the green transition and high-quality development. The pursuit of a low-carbon pathway for China’s development has underpinned a drive to global leadership in green technologies, such as solar power and electric vehicles, and its dominance of strategically important rare-earth supply chains.

While few would question China’s successes in clean energy technologies, the 15th FYP’s challenge will be boosting the utilization of solar and wind power capacity while maintaining a stable power supply despite the volatile nature of renewables.

Opportunities and challenges

When the Party deliberated the 14th FYP in late 2020, it opened by acknowledging a long list of weaknesses—ranging from “unbalanced and inadequate development” to “shortcomings in people’s livelihood” and “weaknesses in social governance”.

None of these problems was mentioned this time, however. Instead, the communiqué described the 2026-2030 period covered by the 15th FYP as a period of both strategic opportunity and risk.

“Beijing is still targeting a minimum level of growth, but the composition of that growth has shifted. It is not enough to just pump up property and rely on debt to increase GDP. There’s been a very clear shift to favor consumption, advanced manufacturing, higher productivity investment, and that looks very much set to continue during the 15th FYP,” says Green.

China’s economic policy over the next FYP period will also need to contend with well-documented challenges, ranging from a poor economy, shrinking population and global fragmentation to supply-chain pressures and US tariffs and export controls on China’s high-tech sectors.

“I tend to think of the three Ds—debt, which is largely property-related, decoupling and demographics,” says Green. “The correction has already occurred on debt and property, and the intensity of the impact on economic growth will moderate over time. Demographics is a slow burn… automation reforms and changes to the retirement age, etc, will generally mitigate and keep the impact fairly consistent with the 14th FYP,” he adds.

Manufacturing’s share of Chinese GDP has declined over the past two decades, from 32% in 2006 to 25% in 2024—a drop that the Committee’s communiqué acknowledged by pledging to “maintain a reasonable share of manufacturing”. But rather than resist the trend, Beijing aims to cultivate industries of the future, develop high-quality services, upgrade infrastructure, and “seize the commanding heights of scientific and technological advancement”.

China’s push to modernize its industrial system is at the heart of the 15th FYP. Beijing already achieved most of the 14th FYP’s innovation-related goals—research and development (R&D) as a share of GDP stood at 2.68% in 2024, ahead of a targeted 2.5%, while R&D spending averaged annual growth of 10.3% in 2021-2024 compared with a target of at least 7%. The key challenge going forward will be to maintain this trend.

Joining the dots

State-owned enterprises (SOEs) play a huge role in the economy of China, and are particularly prominent in areas such as energy, heavy industries, finance and telecommunications. The enduring presence of SOEs within China means they will play a key role in the implementation of strategic priorities. “The new objective of high-quality growth and related KPIs is harder for local governments to fulfil in some ways. This is where SOEs can step in,” says Green.

The role private businesses have been one of much debate in China, and their participation has been garnering attention. “As long as they align with these longer-term national objectives—particularly in advanced manufacturing and software—I think the private sector will be welcomed,” says Green. “The DeepSeek moment has been a helpful pointer in that regard, and the rise of smaller, newer tech champions has crystallized to Beijing that the private sector is necessary and needed,” he adds.

The private sector would likely benefit from improved financing conditions, as the proposals in the FYP draft emphasized better coordination between investment and financing functions, expansion of direct financing channels, and advancement in various types of financial products, according to Guo.

And whereas the 14th FYP emphasized “dual circulation” with a domestic focus, the communiqué called for “expanding international circulation,” “sharing development opportunities with the world,” and “promoting two-way investment”—all of which suggest a more outward-looking China intent on encouraging its firms to invest abroad and deepen trade diversification. An emphasis that may indicate a willingness to increase more reciprocal arrangements.

Action plan

Beijing has framed the upcoming five-year period as a decisive window to accelerate economic transition while proactively shaping a more favorable global environment. This will be easier said than done amid the wide range of economic challenges that it faces.

Still, Beijing can point to successes in technology and renewables achieved by the 14th FYP period as vindication that the five-year planning process—setting direction, aligning institutions, defining priorities—still makes sense for China’s economy, as it races towards 2030.