Path to a high-quality and more balanced growth: What to expect from China’s 15th Five-Year Plan

The 4th Plenum of the 20th Communist Party of China Central Committee was held from October 20 to 23 in Beijing. The key agenda for this meeting was to discuss the proposal for the 15th Five-Year Plan (FYP) for the period 2026 to 2030. The proposal might be publicized soon following the Plenum. At the National People’s Congress annual session next March, this proposal will be reviewed and approved. After that, more detailed targets and plans will be announced in a full FYP document, based on which relevant government departments will make and implement the FYP for each key sector.

Although the full FYP document will be announced in five months, the communique published on October 23 revealed the policy priorities, which could help investors refine their investment strategy and stay ahead of the market trends in China. Here are the key takeaways from the communique: 

• Similar to the previous FYP, no explicit annual growth target was proposed, while an ambitious long-term per capita gross domestic product (GDP) goal was set. The session reaffirmed the commitment to achieving the 2025 economic objectives for a 5% GDP growth, but it did not set specific growth targets for the next five years. Instead, it was proposed that China aims to reach a per capita GDP equivalent to the level of a moderately developed economy by 2035. This might suggest a per capita GDP of USD 25,000, compared to the 2024 level of USD 13,500. To reach this target, China needs to achieve an annualized nominal growth rate of around 6.1% (Exhibit 1). Considering potential currency appreciation and inflation, this might suggest an annualized growth target of around 4.5% for real GDP over the next decade.

• High-quality development remains the overarching principle, while a more balanced policy approach is advocated. The concept of high-quality development was first articulated as the central policy goal in the 14th FYP, and it remains as the top principle in the 15th FYP. Technological advancement and industrial upgrading have long been the main drivers of high-quality development, and China has made significant progress in technology and advanced manufacturing. However, this has also led to path dependence in policies, with a bias toward the supply side and a lack of effective measures to support domestic demand, particularly in consumption.
  
  In the communique, in addition to the persistent emphasis on technology and innovation, expanding domestic demand is designated as a strategic foundation during the 15th FYP period. This might signal a more balanced policy approach to achieve high-quality development. 

• Technological self-sufficiency and innovation remain the primary tasks. As competition with the U.S. continues to intensify, self-sufficiency has become the ultimate goal for technological development. In the communique, technological self-sufficiency remains the core task. Moreover, it advocates seizing the commanding heights of technological development, which represents a further step beyond the previous plan, suggesting higher confidence in domestic R&D and industrial capacity among the leadership.
  
  During the new FYP period, China will seek breakthroughs in areas such as advanced semiconductor manufacturing, artificial intelligence, software, and critical materials, aiming to reduce its dependence on foreign supplies. At the same time, the economy is also expected to strengthen its global competitiveness in green energy, biopharmaceuticals, and the defense industry.
  
  The experience from the 14th FYP period may reinforce the role of targeted industrial policies within the broader policy framework. Combined with the accelerating effects of economies of scale on technology adoption, economic resources are likely to become further concentrated among sector leaders. Given challenges such as government debt and industrial overcapacity, the Chinese government is expected to adopt more sophisticated policy designs, seeking to allow market mechanisms to have a greater role in enhancing the efficiency of both state-owned and private players. The authorities need to be more mindful of tech regulations to support private players in the development of tech hardware and software. 

• The importance of improving living standards and stimulating consumption has risen in the policy priorities. “Continuous improvement in people’s quality of life” has been included as a key task for the first time. The policy focus is shifting from investment in physical assets (infrastructure, real estate) to investment in human development. The communique advocates for high-quality employment, improvement in income distribution, education, social security, and real estate development. This suggests that policymakers have a clear and systematic understanding of the underlying causes behind the current weakness in consumer demand and are seeking to design comprehensive reform measures in response. However, given the complexity of the issue, the implementation of specific policies is likely to be gradual and may take longer than a five-year period to achieve meaningful results.

Investment implications

The release of the communiqué boosted risk appetite, with the technology sector leading the market rally, and both A-shares and Hong Kong stocks posting solid performances after the Plenum. In addition to expectations for long-term policies under the 15th FYP, investors also anticipate further short-term policy easing, as the meeting communiqué emphasized a firm commitment to achieving the 2025 economic growth targets.

Given China’s progress in domestic substitution, as well as the surging global demand for artificial intelligence (AI) infrastructure investments, we remain constructive about the performance of Chinese technology companies in AI, internet platforms, electric vehicles and autonomous driving, robotics, and consumer electronics. That said, as market valuations return to relatively high levels, volatility may also increase. Investors should pay more attention to the fundamentals and earnings prospects of specific stocks. The market cap concentration of Chinese technology giants remains much lower than that in the U.S., which may suggest further consolidation of market share in technology sector.

In the consumer sector, although macroeconomic data indicate an overall softening in the near term, new consumption hotspots continue to emerge. On one hand, emerging consumer segments such as trendy collectibles that cater to younger generations have delivered strong performance. On the other hand, technological advances are constantly creating new demand, particularly in areas where AI intersects with consumer electronics and services. These areas could serve as key focuses for future supportive policies. In China’s dynamic and competitive market, adopting an active management approach is critical for helping investors capture these new trends, identify potential winners, and enhance overall portfolio returns. 

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