As the world tries to come to terms with the energy crisis caused by the US-Israel military conflict with Iran, China finalised its 15th Five Year Plan (FYP) during the 14th National People’s Congress (NPC). To be implemented over the next five years (2026-2030), the FYP is distinct in its strategic emphases for enabling China secure its global ambitions.
The first emphasis is on lowering economic growth. Since the 11th FYP, China has been bringing down its target rate of annual growth of GDP. While the 11th FYP (2006-2010) proposed 7.5% growth in GDP, the 12th FYP (2011-2015) and 13th FYP (2016-2020) targeted 7% and 6.5% annual average growth rates. The 14th FYP (2021-2026)—the first five-year plan announced after Covid-19—focused on “high-quality” growth as opposed to high growth and underpinned annual average growth rate targets of around 5%. The latest FYP has maintained the trend and refrained from setting predetermined annual growth targets. While the text of the final FYP is awaited, the broad expectation is that the growth target will be capped at 5% with a “reasonable range” justifying an even lower annual average growth of 4.5% or thereabouts.
Why is China settling for lower GDP growth? The post-Covid narrative on economic growth in China has concentrated on greater allocation of resources in strategic sectors of the economy. These include robotics, artificial intelligence (AI), quantum computing, civil aircraft production, green industry, semiconductors, and bio-manufacturing. All these sectors are strategic 21st century industries and are being developed for making China hold decisive comparative advantages in their production and supply chains. The geoeconomic intent behind controlling the global outputs of these sectors is obvious. Implementing the intent, however, requires shifting state resources from earlier traditional low-cost export-intensive sectors to the mentioned strategic ones. The latter are now the prime foci of Chinese industrial policy and need heavy investments. Mobilising these investments mean walking back from the earlier strategy of subsidising export-oriented production across the board. While these subsidies can maintain export growth in the short term, as the Chinese workforce shrinks and low-value production moves to other locations, China realises the futility of broad-based export-enhancing subsidies. The emphasis, therefore, is on pushing the state resources to sectors that matter for long-term gain even if that means compromising on exports and overall GDP growth.
Furthermore, with domestic infrastructure across the mainland having reached a threshold level of operational efficiency, China can afford to allocate resources to other sectors. Such reallocation also entails lower rates of growth of GDP. This is inevitable as traditional industrial sectors slowly yield space for future ones, resulting in a structural slowdown and imbalanced industrial growth. Growth aspirations also need to be tempered given the other major structural transformations in the economy, notably shifting to climate-friendly production and hosting greater parts of strategic supply chains within the domestic economy.
The second and notably eye-catching emphasis of the 15th FYP is on technological self-reliance and developing capacities for becoming the world’s leading power in cutting-edge innovative sectors. Three key aspirations are notable in this regard: Maintaining aggregate research and development (R&D) expenditure at more than 7% of GDP; increasing the number of high-value invention patents to more than 22 for every 10,000 people; and lifting the share of digital economy industries to 12.5% of GDP. In 2025, China’s aggregate R&D expenditure was already at 9.1% of GDP, while high-value invention patents and the share of digital economy were 16 and 10.5% respectively.
The R&D metric is especially significant in understanding China’s long-term strategic ambitions. High R&D expenditure aims to modernise traditional manufacturing industries, such as chemicals, electronics, engineering, and automobiles. The ostensible objective is to push these industries up the value chains to high-value added functions supported by greater use of AI. The prominent emphasis on robotics and AI in the 15th FYP underlines this goal along with the understanding that more functions in the modernising traditional industries will be handled by customised robots.
On the other hand, more R&D resources will be deployed in scaling of 21st century industries like embodied AI, bio-manufacturing, green hydrogen, and high-end medical equipment. The fact that China aims to work on identifying key technological breakthroughs in AI and quantum technology, biotechnology, and new energy through the thrust on invention patents and encouragement of their strategic deployments through suitable incentives underscores its geoeconomic ambition of securing and retaining leverage in industries of the future. A variety of policies for supporting enterprise innovation such as increasing deduction for enterprise R&D, enlarging the scope of venture capital funds for enterprises pursuing innovation, and facilitating foreign investment in venture capital are some of the key ones for supporting the goal.
The Chinese FYPs represent a dedicated pursuit of state-driven industrial policy for achieving economic objectives. The 15th FYP maintains the thrust. The strategic goals of the FYP, however, need to be balanced with structural gaps that have become striking in the domestic economy. Most important among these are high household debt precipitated by a melting property market and the concomitant effect on domestic consumption. These are vulnerabilities that are hard to overlook. The rapid deployment of industrial robots, including humanoids, for greater productivity and efficiency has inevitably shrunk opportunities for many among the workforce. The 15th FYP notes some of these concerns and aims to address these through the transforming economic landscape that will pivot on robotics and AI. While the latter construe an infrastructure essential for securing China’s capacities in 21st century industries, they might, however, entail other welfare costs.
The author is Senior Research Fellow and Research Lead, Institute of South Asian Studies, National University of Singapore.
Disclaimer: The views expressed are the author’s own and do not reflect the official policy or position of Financial Express.