NEW DELHI – The 20th Central Committee of the Communist Party of China convened its fourth plenary session in Beijing from October 20 to 23, 2025, focusing on the “Recommendations of the Central Committee of the Communist Party of China for Formulating the 15th Five-Year Plan (FYP) for Economic and Social Development” to give a broad overall blueprint for the plan’s official adoption in March 2026 by the National People’s Congress. The sheer momentum of China’s economy has long been a source of national pride, and as the nation transitions from the 14th FYP to the 15th, the Party confronts a crisis of a vast industrial machine that has perfected the art of generating surplus but forgotten how to share the spoils of its marketization success. After four decades of relentless, often blistering growth defined by heavy investment and exports, the political leadership is now attempting a profound ideological and structural pivot. The next five-year plan, covering the period from 2026 to 2030, is a course correction aimed at tackling the existential threat posed by internal economic contradictions and escalating external containment.
The plenary session has signaled a decisive shift away from prioritizing raw production capacity toward bolstering domestic consumption and engineering genuine “high-quality” growth. In the Party documents, the 15th FYP is positioned as a “critical stage” toward fundamentally realizing socialist modernization by 2035, which requires China to seize the “strategic initiative amid intense international competition”. This plenary session’s recommendations for the 15th FYP matter globally, as their success or failure determines whether the world’s second-largest economy can avoid the dreaded middle-income trap and stabilize amid geopolitical turbulence, protectionism, and the specter of a domestic surplus crisis that threatens global markets.
The Reckoning of Supply and Demand
The 14th FYP period was framed around securing “fruitful advances in scientific and technological innovation” and deepening high-standard opening up, as per the Party’s rhetoric. It exposed a chasm between China’s supply-side capabilities and the lack of robust domestic demand. Economists close to Beijing and the Party identified the persistent strong supply, weak demand situation as the primary macroeconomic constraint. While the Party apparatus proudly points to eliminating absolute rural poverty in 2020 and notable improvements in R&D expenditure, the structural imbalance is endured, even though it now approaches OECD levels.
The fundamental challenge is to address decades of prioritizing investment, infrastructure, and industrial capacity, which have squeezed household consumption as a share of GDP. For the 15th FYP, this script has been rethought. Lu Feng, a prominent economist and professor at the National School of Development (NSD) at Peking University, advocated redirecting substantial public resources toward livelihood and consumption support, while others called for elevating consumption expansion to an equal priority with innovation and industrial upgrading. The explicit goal enshrined in the new plan’s objectives is to achieve a notable increase in household consumption as a share of GDP, transforming domestic demand into the principal engine of economic growth, in his words. This step requires dismantling the deeply embedded administrative structures that historically privileged heavy industry.
To translate this jargon, this required strategic pivot is fundamentally tied to the concept of Common Prosperity (gòng tóng fù yù). One might think of it as income transfers, but it is way different from that. It demands significant structural reform in income distribution, the expansion of social protection, and the equalization of public services. A specific policy target is the gradual increase in basic old-age insurance benefits for rural and non-working urban residents, and the addressing of a glaring weakness in the social safety net. This is intended to boost consumption confidence by reducing the need for precautionary household savings, particularly for health care and elderly care.
For example, imagine a county cadre in Zhejiang who is traditionally evaluated purely on attracting capital projects. Under the 15th FYP’s implied metrics, that cadre’s success hinges less on the smokestack factory floor count and more on Public Service Equalization, ensuring migrant workers and new urban residents gain access to quality education, housing security, and portable benefit packages. This requires a significant fiscal adjustment that moves the government moderately from an investment-heavy to a service- and people-centered model, ensuring stable funding for expanded social programs. Simultaneously, the Party is pushing for accelerated household registration (hukou) reform to dismantle the dual-track system, which Liu Yuanchun stressed must deliver a breakthrough in narrowing urban-rural social security gaps to complete the citizenization of hundreds of millions of migrant workers.
Innovation and Security
If the 15th FYP pivot is about fixing how the economy distributes wealth, the twin focus on technological supremacy is about securing what the economy produces. Technological self-reliance and strength in science and technology have national security imperatives driven by intensifying friction and external technological restrictions, particularly from the United States of America.
The rhetoric of developing New Quality Productive Forces (NQPFs) (xīn zhì shēng chǎn lì) is central now, which broadly tackles innovation-driven, coordinated, and green progress. In recent years, it has also been used to describe the use of AI for development. While AI occupies attention, the strategic focus is also on securing decisive breakthroughs across entire industrial chains in critical areas, including integrated circuits, high-end equipment, advanced materials, and biomanufacturing. Driven by mounting friction with major trading partners and external technological restrictions, achieving scientific and technological self-reliance and strength has shifted from an economic objective to a critical national security imperative aimed at overcoming external containment. Policy language in the 15th FYP recommendations emphasizes placing the modernized industrial system at the forefront and positions scientific innovation directly after it. This sequencing reflects a pragmatic turn, as often referenced in “continuing the reform”. The focus has shifted from transforming breakthroughs (the zero-to-one phase of the 14th FYP) into scalable, high-value production capacity (the crucial one-to-100 impact). With this, the Digital China Initiative is integral, too, as it promotes the full integration of the real and digital economies and ties back to the broader goal of developing AI and advanced computing power. Education and talent systems are being integrated with technology and human resources planning. There have been proposals to establish a high-skill talent migration system to attract global expertise in this technology. But this still remains a highly centralized and ambitious approach that carries the inherent risk of creating a massive overcapacity, as already observed in the clean-tech and electric vehicle sectors. This would trigger a destabilizing surplus crisis if production outpaces genuine, sustainable market demand.
The emphasis represents a critique of the previous plan’s execution. While the 14th FYP prioritized breakthroughs (the zero-to-one phase), the 15th FYP insists on application and ecosystem shaping (the one-to-100 phase), aiming for scalable, real-world value. For example, consider an engineer in Shenzhen who spent the 14th FYP developing foundational AI algorithms. Under the 15th FYP, that engineer must pivot toward applications such as biomanufacturing, “embodied artificial intelligence (AI),” and humanoid robotics, leveraging the AI-plus national strategy to infuse these technologies into traditional sectors and create new, high-quality manufacturing clusters. The central government encourages local authorities to develop NQPFs “in line with local conditions,” cautioning against rushing headlong into new, non-feasible initiatives.
This technological race is conducted under the umbrella of the Dual Circulation (shuāng xún huán) strategy. The shift is subtle but profound: Dual Circulation is less about closing the doors and more about building a domestic system robust enough to withstand foreign choke points while selectively engaging the world on Beijing’s terms. Policies promoting high-standard opening up remain in place, including faster facilitation of regional and bilateral trade agreements, yet openness is viewed through a more strategic lens, seeking to align with high-standard international economic and trade rules. The aim is to promote “unimpeded domestic and international economic flows,” confirming that China is leveraging its enormous market size—a colossal strategic advantage—to attract global resources, even as major-country rivalry intensifies.
The Green Transformation and Energy Flexibility
The commitment to the Green Transition and the Beautiful China Initiative is a critical element carrying over from the 14th FYP, retaining the binding goals of peaking carbon emissions before 2030 and achieving carbon neutrality by 2060. China is trying to position itself as the global leader in renewable energy capacity additions, particularly in solar, wind, and hydroelectric power. But the legacy of the 14th FYP is marked by a profound contradiction. Despite rhetorical commitments, China’s coal consumption increased every year during this period, resulting in a 10.3% rise in carbon emissions from 2020 to 2023. The plan fell far short of its binding target to reduce carbon intensity by 18%.
The 15th FYP aims to address this by accelerating the transition to a new, clean, low-carbon, safe, and efficient energy system. This requires profoundly reforming the antiquated power grid infrastructure, as recommended. With wind and solar capacity projected to quadruple by 2030, the short-term flexibility needed for daily grid operations is expected to triple. The Party acknowledges that currently, over 90% of traded electricity is locked into medium- to long-term contracts that use fixed prices, thereby preventing flexibility signals that reflect real-time grid needs.
Consequently, the 15th FYP policy toolkit, as informed by analysis from the International Energy Agency (IEA), focuses heavily on market-based solutions. This includes increasing the price range fluctuation in electricity markets, remunerating grid capacity rather than utilization rates (which currently incentivize pairing Variable Renewable Energy with coal plants), and unifying provincial power markets nationwide to allow efficient surplus trading. This technical focus on power market reform shows Beijing’s understanding that administrative fiat alone cannot secure the green transition. A fundamental economic restructuring must occur within the energy sector to maintain grid stability while accommodating vast amounts of variable power generation.
The Centralization of Governance
The Party’s Fourth Plenum reinforced Xi Jinping’s singular position of leadership, declaring him the “helmsman” whose thought guides the entire modernization effort. The entire exercise, from the extensive solicitation of over three million public comments to the final issuance of the recommendations, emphasizes the Party’s role in managing changes in a volatile environment.
The plan’s focus on governance implies a further centralization of strategic control alongside a decentralization of execution responsibility. There have been calls to modernize the central-local fiscal framework, expand central responsibility for services with national spillovers, and improve transfer payment equity. This movement effectively nationalizes the financial burdens of key social welfare functions (such as core pensions and unemployment insurance pooling), while requiring local governments to align their spending with HQD objectives and to shift away from narrow GDP competition.
The governance priority is fundamentally a matter of security by focusing on “Ensuring both development and security”, according to the rhetoric. The external environment, characterized by geopolitical conflicts and “uncertainties and unforeseen factors,” dictates that internal stability and strategic resilience take precedence. The plan calls for reinforcing national security capacity in key sectors and achieving the centenary goals of the People’s Liberation Army by 2027. This commitment solidifies the long-held position that markets are essential tools, but only when strategically utilized by a strong state to achieve overarching national goals.
Who Gains, Who Loses, and What to Watch
The winners are the consumers and the middle class in China. They are the explicit focus of the demand-side stimulus. Suppose policies aimed at equalizing public services, boosting rural pensions, and reducing precautionary savings succeed. In that case, discretionary spending will rise, benefiting sectors tied to lifestyle upgrades, services, healthcare, education, and digital consumption. Along with this, engineers and high-tech industries would also benefit. Companies and talent aligned with NQPFs —AI, biomanufacturing, advanced materials, and digital transformation —will receive intensified state support, R&D funding, and preferential government procurement. Ultimately, it would also benefit the service sector. It is identified as the primary demand-side weakness. Service consumption (healthcare, elderly care, cultural, and recreational services) is targeted for rapid expansion and quality improvement.
The debt-financed local cadres and legacy industries might take a toll. Local governments accustomed to prioritizing infrastructure debt are now forced to reallocate spending to welfare programs, straining local finances and requiring significant fiscal reform. Traditional, high-polluting sectors, particularly those struggling with massive overcapacity (such as steel and perhaps certain EV segments), are highly likely to face increasing pressure to consolidate, undergo green transformation, or undergo orderly relocation. Foreign firms in sensitive tech sectors might face restrictions as well. While the high-level opening remains, the drive for technological self-reliance means foreign companies face intensified competition from increasingly capable domestic firms and may experience reduced reliance on imported technologies in the long term, particularly in “sensitive or strategic sectors” such as semiconductors and foundational software.
The success of the 15th FYP hinges on several crucial indicators. Lu Feng suggested incorporating a clear target to increase the consumption rate by 5–10 percentage points. Whether the final plan adopts such an explicit quantitative target will signal the leadership’s resolve to truly prioritize demand over production. The implementation of fiscal reforms and centralization should be observed. Any concrete actions on fiscal reforms, especially the actual deployment of stable funding mechanisms for pensions, and the extent to which local government performance metrics genuinely shift away from narrow economic growth toward balanced outcomes and public service delivery. The integration of power and markets should also be closely monitored. The plan requires rapid, comprehensive market reforms in the power sector, specifically the unification of provincial markets and the introduction of price signals to integrate large-scale VRE. Failure here could derail both the green transition and economic stability.
Samyak Mishra
Samyak Mishra is pursuing International Relations, Political Science, and China Studies at Ashoka University, India. His academic interests center on East Asian authoritarianism and totalitarianism, the politics of one-party states, and civil-military relations, with a particular focus on the ideological and institutional foundations of the People’s Republic of China and the Democratic People’s Republic of Korea.
- Samyak Mishra#molongui-disabled-link
- Samyak Mishra#molongui-disabled-link
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