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Much has changed since China’s top Communist party officials gathered in 2020 to set out their economic priorities for the country’s current “five-year plan”. Donald Trump’s frenetic second US presidency has upended the global trading system. An ongoing property slump has battered consumer confidence, compounding the public’s shaken faith in Beijing’s economic management after the sudden abandonment of draconian Covid-19 restrictions. Leaders are increasingly concerned about neijuan, or “involution” — shorthand for industrial overproduction fuelling ferocious price wars across the manufacturing sector.
So there are some understandable notes of caution in the conclusions of the senior cadres who gathered last week to discuss policy for the half-decade from 2026-2030. The communiqué from last week’s meeting, presided over by President Xi Jinping, highlights increasing “uncertainties and unforeseen factors” and looming “profound and intricate changes” to China’s development environment. But there is no retreat from the manufacturing-led development pursued under the current five-year plan. With phrasing likely to strike fear into companies and countries already struggling to compete, the communiqué calls for an acceleration of work “to boost China’s strength in manufacturing” and makes substantially increasing technological self-reliance a top objective.
This too is understandable. While the US and other developed economies thrash about in search of consistent and effective industrial policies, Beijing’s channelling of capital into increasingly advanced manufacturing has helped China become a world leader in strategic sectors such as green energy, batteries and electric vehicles. It increasingly competes at the cutting edge in sectors where just a few years ago it was seen as only a low-cost option. Chinese drugmakers, for example, have struck a record 93 overseas licensing deals worth a combined $85bn in the first eight months of 2025. “We are seeing the strengths of socialism with Chinese characteristics, China’s enormous market, its complete industrial system, and its abundant human resources all coming to the fore,” as the communiqué puts it.
The risks of state-directed policy are also becoming more apparent, however. Wasteful industrial policy is a prime suspect in China’s low productivity growth. The gush of capital into companies and clusters in favoured sectors has created overcapacity, and many businesses are struggling to survive.
While the communiqué does not mention involution directly, official concerns can be sensed in its reference to keep manufacturing’s role in the economy to an “appropriate level”, to promote “co-ordinated regional development” and to do more to encourage domestic consumption. Like counterparts in the EU and Canada, party leaders are sensibly seeking to remove barriers to trade and commerce within China’s own domestic market. Yet no road map is being offered for resolving the ongoing property slump, a major drag on consumer sentiment, or of action beyond the stimulus spending or subsidies that have so far failed to ignite demand and shrug off deflationary pressures.
Nor are there signs of the kind of fundamental strengthening of China’s social security net or expansion of affordable healthcare that might over time encourage greater household spending even as it fostered a happier population. Meeting the people’s “ever-growing needs for a better life” remains the party’s “fundamental goal”, the communiqué says, but it is clearly not the most pressing policy priority.
The party can argue that focusing on national strength and competitiveness rather than public contentment has served China well. But relying on the outside world to serve as a driver of demand has become more difficult for China’s industrial, export-driven growth model since 2020. It looks an even riskier bet in an era of geopolitical stress and Trumpian trade protectionism.