China: What to Expect from the Fourth Plenum (October 20-23)

SUMMARY

• China’s upcoming plenum meeting will preview the 15th Five-Year Plan (2026-2030), which will not be released until March 2026; the plenum will have relatively little of immediate relevance for stimulus policies or the US-China outlook.
• We expect the 15^th Five-Year Plan to signal broad continuity in policies, but there will be several important watchpoints related to Beijing’s urgency in boosting growth, consumption, and job creation, and the direction of tech and industrial policies.
• The plenum is also the occasion for personnel moves that serve as a prelude to Xi’s fourth term in power in 2027; Xi’s unprecedented purge of senior military officials, announced last week, is a signal of his political strength rather than of weakness.

OVERVIEW

On October 20-23, China’s senior political leadership will convene the fourth “plenum” meeting of this five-year political cycle, bringing together the almost 400 members and alternate members of the Chinese Communist Party’s Central Committee.

The main agenda for this plenum is to approve the leadership’s “proposals” for China’s 15th Five-Year Plan (FYP), covering the period 2026-2030. In reality, drafting of the FYP is probably largely done, and the meeting will serve as a formal endorsement of its main elements. The full FYP will come out in March 2026, after it is formally approved at the annual National People’s Congress.

For a deep-dive on the plenum and the FYP, we would recommend this recent analysis by the Asia Society Policy Institute (link HERE). In this note, we focus on the main watchpoints for markets.

What News Actually Comes Out of the Plenum, and When?

The notional timeline draws from the Asia Society’s preview, which in turn is based on past precedent. Note that the most substantive signals as to the FYP come out on October 27-28, several days after the plenum concludes.

• October 23: At the conclusion of the plenum, China’s Xinhua News Agency will release a communique of the meeting. This may offer some clues as to key themes in the FYP but with little in the way of details.
• October 24 (TBC): Officials from senior CCP bodies are likely to hold a press conference with further discussion of key themes in the FYP.
• October 27-28 (TBC): Xinhua will release the “proposals” approved by the plenum, essentially providing a high-level outline of the FYP. It will also publish Xi’s “explanation” of the proposals, which will offer additional clues as to the most important ideas.

What Should Investors Watch For?

We doubt that the plenum meeting will be highly market-moving, for two reasons:

1. The FYP guides China’s medium-term policy agenda. Most of the content relates to industrial and structural reform policies, rather than cyclical policies and stimulus measures. The media will likely over-interpret what the plenum signals about the near-term policy outlook.
2. We expect overall continuity in terms of the key themes of the FYP rather than major policy shifts. Our expectations for major policy shifts are low, and this view was shared by contacts during our annual investor trip to China in September (see our trip report HERE).

What Do We Expect from the Five-Year Plan?

The 15^th FYP will likely have several key themes:

• “New Quality Productive Forces”: This is Xi Jinping’s catchphrase for the shift from resource-intensive to innovation-intensive growth. For Beijing, this agenda is key for sustaining growth as the labor force ages and shrinks, and for outcompeting the United States. The main weakness of Beijing’s approach is that it seeks to achieve productivity growth mainly through industrial policy and tech advancements, while underplaying the need for reforms that would reduce the political distortions in the economy (such as the large role of state-owned enterprises), which are a heavy drag on productivity.
• Strengthening Economic/Technological Resilience: When it came out in early 2021, the current FYP signaled a clear focus on making China’s economy more resilient in the face of intensifying US-China competition. This meant an emphasis on extending China’s lead in advanced manufacturing and critical supply chains, partly as a deterrent against export controls from the United States. This strategy proved highly effective this year, as Beijing has used its dominance of rare earths to pressure the Trump administration to de-escalate tariff and export control measures. The next FYP will continue to focus on advanced manufacturing as the key to resilience, likely emphasizing the integration of industry and AI.
• Promoting Consumption: The limits of growth through manufacturing investment (excess capacity) and exports (growing trade tensions) are forcing China’s leadership to pay more attention to measures to boost household consumption. However, we expect the rhetoric on consumption to outpace policy, which will be quite incremental (see below).

Both at the plenum and in the period that leads up to the March NPC, we will be watching these signals most closely:

• How strong is the pro-growth message? Unlike the current FYP, the next one will include a target for annual GDP growth, as Beijing recognizes the need to anchor expectations. The target will either be “at least 4.5%” or 5%, but this will likely not be formally announced until March. A 5% goal would, overall, be positive for markets, but it depends on the policy mix to get there, including the mix of consumption and investment. On the investment side, the FYP will promote a new crop of centrally funded mega-projects, which will be important for sustaining infrastructure investment amid the debt problems of local governments.
• How serious is the FYP about boosting consumption and household income growth? The three pathways to boosting consumption are to: (1) reduce the need for high household saving rates, mainly by strengthening the social safety net; (2) direct a greater share of GDP to household income through income transfers, and (3) boost job creation. The first two are important, but face ideological and fiscal constraints. By contrast, we are cautiously optimistic that job creation will become a higher policy priority. This expectation is based on two considerations. First, despite a stable official unemployment rate, underlying labor market conditions are significantly weaker and remain a key economic and social stability risk. Second, job creation benefits all stakeholders—including the government—and is therefore politically more attractive than income redistribution. If overall consumption plans underwhelm (as we expect), it will imply slow progress in breaking out of deflation and excess capacity.
• What is Beijing signaling about priorities for industrial and tech policy? The current FYP made a concerted push from “soft tech” (e-commerce) to “hard tech” (clean energy, chips, biotech, etc.). A key watchpoint this time will be Beijing’s evolving strategy for generative AI. We expect a focus on AI adoption and industrial integration, leveraging open-source collaboration, contrasting with a US focus on pursuing proprietary frontier models. It will also be interesting to see how Beijing frames its strategy for breaking the US stranglehold on advanced semiconductor technology.
• How will the FYP address “involution,” deflation, and excess capacity? We doubt that Beijing will enshrine “anti-involution” as a key pillar in the Five-Year Plan. Beijing will likely continue to treat excess capacity and price wars as behavioral problems, focusing on measures to discipline local governments and firms. This approach will be less effective than pursuing strong macroeconomic measures (cutting supply while boosting demand) and structural reforms (making it easier for money-losing firms to declare bankruptcy and exit the market).
• What will the FYP say about trade and investment priorities? Beijing will try to contrast its pursuit of trade and investment deals with a protectionist US. We will watch for whether Beijing signals plans for further opening the domestic market, and curbing excess capacity, as ways to reduce major trade tensions with the US, EU, and even developing countries.

What Do We Make of Recent Military Purges?

Beyond the policy discussions, the plenum is also a watchpoint for elite politics. In fall 2027, Xi will very likely start a fourth five-year term as China’s leader, with a mostly new supporting cast. Personnel moves at the plenum – that is, additions and removals from the CCP’s Central Committee – are part of the prelude to that leadership transition.

The big news thus far has been the announcement ahead of the plenum that Xi has purged nine senior members of China’s military, including the second most senior general, HE Weidong. This continues an unprecedented series of elite purges under Xi that have concentrated on the People’s Liberation Army.

We concur with the consensus view of Chinese elite politics experts, which is that these military purges generally reflect Xi’s political strength rather than a sign of weakness. Xi’s main motivation is to remove military leaders who are corrupt or insufficiently loyal to Xi. If there is an upside to markets from these moves, it is that Xi’s questionable confidence in the leadership of the PLA is another reason to be skeptical that Beijing contemplates an armed conflict over Taiwan anytime soon.