Beijing just concluded its Fourth Plenum meeting, releasing a communique that previews key priorities for the Fifteenth Five-Year Plan (2026-2030). See our plenum preview note HERE for broader context.
Note that today’s communique is only a high-level preview of the next Five-Year Plan. Beijing will release a somewhat more detailed set of proposals in coming days (likely around October 27/28), but only release the full plan at the March 2026 National People’s Congress.
Key Takeaways:
Beijing is doubling down on a growth strategy focused on manufacturing and technological self-reliance, with economic rebalancing a secondary consideration. As we expected, there is more continuity than change with respect to Beijing’s key priorities:
- The two main tasks in this plan, as in 2020, are to (1) advance China’s role as a manufacturing powerhouse; and (2) promote scientific and technological self-reliance, now under the mantra of “new quality productive forces.”
- There is no discussion of anti-involution or even more indirect references to addressing the problems of excess capacity and duplicative investment, implying that Beijing regards these as temporary problems.
- The document pledges to “maintain a reasonable proportion of manufacturing [in the economy],” reflecting Beijing’s determination to prevent deindustrialization and its lukewarm view towards promoting the service sector as a key policy goal.
At the political level, it is worth noting how Beijing is framing the external and domestic environment. On the one hand, Beijing is more confident than ever in China’s technological and industrial capabilities. At the same time, it views the external environment as uncertain and risky, a reference to intensifying US-China competition as well as the volatility that comes with a transition away from a US/Western-led global order. For Xi Jinping’s grand strategy, this requires a disciplined approach to boosting China’s own domestic economic and technological resilience, while expanding China’s role in global supply chains to assert its influence and interests.
The communique pledges stepped up efforts to promote consumption and improve livelihoods, but policy efforts will be gradual. Much of the discussion of promoting consumption focuses as much on supply-side as demand-side measures. There are pledges to strengthen the social safety net “to the utmost of our abilities,” a reference to Beijing’s concern about not making spending commitments that create large fiscal burdens. There is little discussion of the longer-term fiscal reforms (taxation, transfers) that will be necessary to boost consumption. Beijing’s focus on consumption and livelihoods is motivated as much by political objectives – improving quality of life – as it is a macroeconomic strategy to rebalance the growth drivers in the economy.
There are no signs of major changes in Beijing’s approach to growth. The new Five-Year Plan, unlike the current one, will very likely include a target for annual GDP growth. China’s leadership recognizes that a clear target is important for anchoring expectations. However, the text does not clearly signal whether this will be 4.5% or 5%. More broadly, there are no signs of major shifts in terms of the balance between promoting growth and guarding against debt risks as would suggest that Beijing is prepared to more aggressively reflate the economy.
Near-term stimulus measures will remain incremental. The upcoming end-October Politburo meeting on the economy is the more important meeting for macro policies, but the plenum communique includes a short section near the end discussing the current economic situation. The text stresses continuity in macro policies, though a reference to “special measures to boost consumption” implies that Beijing will continue to roll out limited-duration subsidies and cash payments to try to lift flagging retail and service consumption. The communique also notes attention to the weak labor market, which remains an important watchpoint as such concerns could trigger more aggressive fiscal stimulus in 2026.
Market Implications:
The preview of the Five-Year Plan suggests broad continuity in economic policies, and thus implies a continued split-screen picture of China’s economy: impressive growth in advanced manufacturing and the supply-side of the economy, contrasted with subdued consumption and domestic demand, entrenched deflationary pressures, industrial excess capacity, and a large manufacturing trade surplus.
China’s equity market outlook will remain a tension between the dynamic story around high-tech industry and a less impressive macroeconomic backdrop.
For advanced economies, concerns around a new phase of the “China Shock” will mount. Beijing is intent on furthering China’s dominance in industry and becoming a technology powerhouse. Given a weak domestic economy, Chinese firms will continue to look overseas for key growth opportunities.
