China has recently published its 15th Five-Year Plan (FYP) for 2026-2030. The plan envisions a 4.5 percent average annual economic growth rate over the decade. The plan emphasizes total factor productivity (TFP) growth through innovation, aiming to double the 2020 per capita GDP by 2035. The plan was made public in late October. It comes on the heels of the Fourth Plenary Session of the Chinese Communist Party (CCP), which laid the groundwork for these ambitious proposals.
Going forward, the Chinese government does plan to adopt countercyclical macroeconomic policies to stabilize growth, employment, and expectations. Further, any impact from an expansionary fiscal policy will shift this growth trajectory upward. It will spend more explicitly on boosting household well-being, thereby increasing consumption’s share of GDP.
The People’s Bank of China (PBoC) stands prepared to deliver a more accommodative monetary policy. This approach will no doubt increase the global adoption and usage of the Renminbi (RMB). This strategy further complements China’s aim to boost the share of private investment in its economy.
Second, China hopes to shift proactively promoting enterprise participation in flagship works, cultivating a more vigorous and dynamic economic atmosphere. As external uncertainties continue to loom, domestic demand is emphasized as key, reinforcing a pivot to focus on internal drivers of growth.
“Proposals in formulating the 15th Five-Year Plan (FYP, 2026-30) and the related ‘study guide’ were released in late October, following the Fourth Plenum of the Chinese Communist Party (CCP). The thrust of the documents is broadly in line with our expectations. The government appears to be aiming for average growth of around 4.5% in the next five years, paving the way for doubling the 2020 per capita GDP by 2035. Total factor productivity (TFP) growth via innovation has been highlighted as the main driving force of growth, with emphasis on the importance of domestic demand amid external uncertainty.” – Standard Chartered’s economists.
This emphasis on TFP growth highlights the need for innovation to be the first-mover driver of any sustained economic growth. China’s guiding vision for a new industrial policy aims to upgrade the old industrial system and cultivate new growth drivers. Expanded research and development (R&D) initiatives are poised to ignite innovations in key technologies. This advancement will further reinforce China’s competitive advantage in the international market.
“Industrial system modernisation tops the medium-term agenda, focusing on upgrading traditional industries and nurturing new growth engines. R&D is expected to be further promoted to achieve breakthroughs in core technologies. China also aims to maintain a reasonable share of manufacturing in the economy. Green transition is another area of focus, guided by the goal of achieving peak carbon emissions by 2030.” – Source not specified.
The plan’s focus on environmental sustainability is commendable. The green transition is expected to be an important engine of China’s economic strategy, with a goal of achieving peak carbon emissions by 2030. This commitment is indicative of a growing international consensus on the need for sustainable development.