China’s Communist Party meets for its next five-year plan
This report is from this week’s CNBC newsletter The China Connection, bringing you insights and analysis into what’s driving the world’s second-largest economy. You can subscribe Here.
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As tensions with the United States flare, China charts its course for the next five years.
President of China Xi Jinping and the country’s top leaders, known as the Central Committee, will meet Monday through Thursday next week for a planning meeting called the “Fourth Plenum.”
The meeting is a reminder to the U.S. government that it is likely on the verge of its end. longest shutdown in history China has a great belief in planning. Beijing has held two strategy-setting meetings every ten years since then. 1950s To rally the country around certain social and economic goals.
This year, China promoted the achievements of the “14th Five-Year Plan” despite US pressure on technology and trade.
Zong Liang, former chief researcher at Bank of China, said the upcoming “15th five-year plan” is particularly critical as China lays out longer-term targets for 2035. Until then, China’s goal is Increasing gross domestic product per capita While making “major breakthroughs” in basic technologies, it is advancing towards mid-level developed countries.
But that avoids the immediate challenges policymakers will discuss next week: escalating U.S. tech restrictions, the possibility of a 100% tariff increase and lackluster domestic demand.
Instead of announcing sweeping changes, Zong said Beijing would double down on “reforms” aimed at boosting domestic demand, from reducing regional trade barriers in China to expanding visa access.
Following a recent increase in support for high-tech industries, Beijing will likely pledge further support for home-grown semiconductors, artificial intelligence and humanoid robots. Full details are not expected to emerge until the annual parliamentary meeting in March 2026, but a reading of next week’s meeting could offer an early look at exact priorities.
“Technology part [plan] The focus should be on two things: AI, where adoption in key areas needs to reach 90% by 2030; and basic scientific research that falls slightly short of the official target,” Tianchen Xu, Asia senior economist at the Economist Intelligence Unit, said in a note.
At a time when the United States is scaling back its climate commitments, China has the next five years to fulfill its promise to start reducing carbon emissions after 2030.
So far, China has fallen short of its emissions reduction target, Xu said. “We think achieving this goal is still possible, but it will require more concerted efforts on energy market reform and weeding out emissions-intensive industries.”
A Chinese flag flies above the Great Hall of the People before the opening ceremony of the Belt and Road Forum (BRF) to mark the 10th anniversary of the Belt and Road Initiative on October 18, 2023 in Beijing, China.
Edgar Su | Reuters
Planning and adaptation
It is still unclear whether China can rely solely on planning to achieve technological breakthroughs and economic growth.
In fact, Macquarie’s China Chief Economist Larry Hu noted that the country’s three most significant economic changes in the past 25 years “were driven by external demand.” [changes] Instead of Five Year Plans.”
These include China’s increasing role in global supply chains following its accession to the World Trade Organization and Beijing’s decision to crack down on the real estate sector. Hu now expects another major turning point as exports cool. Recent flexibility despite US tariffs.
And of course, China’s passion for electric vehicles has shaken up the global auto industry. However, Beijing also fell short of many of the “Made in China 2025” targets announced in 2015.
The domestically produced C919 passenger jet, for example, continues to rely on U.S. and European components.
national security
There are also growing concerns that China’s emphasis on production without sufficient domestic demand is leaving many companies in a difficult situation. Race to the bottom. The resulting oversupply has flooded global markets with cheap goods, weighing on other countries’ industrial bases and prompting tariff threats not only from the United States but also from Mexico and the EU.
Beijing’s line is that countries should not blame China and instead share technology, with each country playing to its own strengths.
Some countries, including Russia and other members of the Shanghai Cooperation Organization that met in Tianjin last month, have expressed interest in adopting Chinese technology, which is often cheaper than U.S. or European alternatives. For example, DeepSeek undercut OpenAI in both AI operating costs and accessibility.
But other countries may see China’s rise as a threat. Washington has tightened export controls and expanded tariffs as Beijing continues to challenge US dominance in key industries. Meanwhile, China’s economic expansion continues to threaten Washington’s dominance of the world’s largest economy.
Hence Article 22 of China’s goals: Beijing underlined the need to balance national security and development. The country is also keen to prioritize self-preservation and internal stability.
Next week, Chinese leaders will signal how they expect this contradictory mix of ideals to be realized, before looking at whether Xi will meet Trump in South Korea later this month.
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quote of the week
The problem is [Chinese] The leadership is prioritizing the manufacturing sector due to economic security concerns, but employment in this sector is not increasing. Production is growing rapidly, but much of this production is driven by automation, so it doesn’t really increase labor demand. We would like to see more focus on the service sector because this can provide many of the jobs that young people need.
— Julian Evans-Pritchard, head of China economics at Capital Economics
In the markets
Chinese stock markets traded higher on Wednesday after US Federal Reserve Chairman Jerome Powell made several statements It implies that there is a possibility of further interest rate cuts.
The Hang Seng Index rose 1.94%, while the CSI 300 rose 1.47%. Both indices increased by around 29% and 17% respectively. The yield on China’s 10-year government bond fell nearly one basis point to 1.757%.
Shanghai Composite’s performance last year.
approaching
October 16: Alibaba’s Tmall holds Singles’ Day shopping festival press conference in Shanghai
October 17: Apple opens iPhone Air reservations in mainland China, with sales starting October 22
17 – 19 October: GT World Challenge Asia was held Racing series in Beijing for first As China tries to organize locally organized sporting events
October 20: China to release third-quarter GDP, retail sales and other economic data for September
20-23 October: China to hold ‘Fourth Plenum’ to discuss development goals for the next five years
