How to Advance Economic Development in the First Year of the 15th Five-Year Plan

In 2025, amid complex changes in the economic environment both at home and abroad, the Chinese economy forged ahead against headwinds and achieved innovation-driven, high-quality development. China’s gross domestic product (GDP) reached a new high of 140 trillion yuan, and per capita GDP surpassed US$13,000 for the third consecutive year. The value added of manufacturing totaled 34.7 trillion yuan, ranking first globally for the 16th year running. The volume of goods imports hit another record high of 18.5 trillion yuan. The main targets and tasks for economic and social development were fully accomplished, new advances were made in high-quality development, and the 14th Five-Year Plan period (2021-2025) was brought to a successful close. All of this has laid a solid foundation for a strong start to the 15th Five-Year Plan (2026-2030).

Boosting both consumption and investment

For some time now, China has steadfastly pursued the strategy of expanding domestic demand to continuously unleash both consumption and investment demand. As a result, domestic demand has come to play an increasingly prominent role in powering economic development. However, the problem of insufficient domestic demand has yet to be fundamentally resolved, which is manifested primarily in inadequate household consumption capacity and willingness, sluggish consumer demand, and weak effective investment growth. At its fourth plenary session, the 20th CPC Central Committee listed “a lack of effective demand” as one of the risks and challenges facing the economy. At the Central Economic Work Conference held toward the end of 2025, it was further noted that “the contradiction between strong supply and weak demand at home has become pronounced.” President Xi Jinping has identified “prioritizing the expansion of domestic demand and building a robust domestic market” as the foremost of the key tasks for economic work in 2026. To effectively expand domestic demand, concrete steps must be taken to boost both consumption and investment.

Citizens and tourists shop for traditional Chinese food at a store in Shanghai, January 3, 2026. The 2026 “Shopping in China” and Chinese New Year Consumption Season campaigns kicked off in Shanghai on the same day, with a series of activities centered on goods, services, and innovative consumer experiences. PHOTO BY XINHUA REPORTER FANG ZHE

Looking at China’s development, it is clear that investment has played a crucial role in driving economic growth, while consumption is growing into the dominant force sustaining sound economic development over the long term. In the face of rising external uncertainties, only by better balancing the relationship between consumption and investment and building a strong domestic market can we keep economic growth within a desirable range.

It is imperative that greater emphasis is placed on vigorously boosting consumption. As a core component of domestic demand, consumption marks the end of one cycle of social reproduction and the beginning of the next. It is a key link in domestic economic flows, directly driving supply, creating demand, and propelling high-quality economic development. In 2025, domestic demand contributed more than 67% to economic growth for the year, with consumption alone accounting for 52%, which further highlights the foundational role of consumption in economic development. At present, however, household consumption accounts for only around 40% of GDP, which is 10 to 30 percentage points below the level of developed countries and also below the global average. The share of service consumption is particularly low. At the same time, ongoing economic development has driven further expansion of China’s middle-income group and led to more diversified demand as people pursue a higher quality of life. This points to considerable room for growth and enormous potential in the consumer market.

Focusing on the present, steps should be taken to advance special initiatives to boost consumption, increase the supply of quality goods and services, enhance the implementation of policies on large-scale equipment upgrades and consumer goods trade-in programs, unleash the potential of consumption in culture, tourism, and other service sectors, and eliminate excessive or “one-size-fits-all” restrictions on consumption. Over the longer term, efforts should be made to formulate and implement income growth plans for both urban and rural residents, so as to effectively bolster consumer spending power and stimulate the internal drivers of household consumption.

Government investment and policy incentives should be leveraged to effectively drive investment across society. As a critical component of domestic demand, investment can both expand immediate demand and shape future supply. It thus serves as a key pillar for expanding domestic demand and stabilizing economic growth. At present, China’s per capita capital stock remains well below that of developed economies, its capital structure is still suboptimal, many weak links in economic and social development have yet to be addressed, and the overall savings rate remains relatively high.

All this indicates ample room for expanding effective investment. Investment in physical assets and in people must be closely integrated to build stronger growth momentum behind effective investment. Government investment is a powerful lever for guiding and mobilizing social capital to increase effective investment. As such, the scale of investment within the central budget should be increased appropriately; the implementation of projects to support major national strategies should be optimized; security capacity building in key areas should be strengthened; and management over the use of local government special-purpose bonds should be improved.

Private investment is an important force for driving overall investment. Moves should thus be made to improve the long-term mechanisms that enable private enterprises to participate in major projects, while strengthening support for these projects through better access to production factors and financing. Systematic steps should also be taken to remove obstacles, difficulties, and pain points constraining private investment. The aim should be to effectively unlock the vitality of private investment. In addition, we should continue to tap the full potential of our cities, advancing urban renewal to a high standard and better leveraging its important role in driving investment, expanding domestic demand, and keeping growth stable.

Further advancing technological and industrial integration

President Xi Jinping attaches great importance to scientific and technological innovation and has stressed the importance of “pursuing innovation-driven development and fostering new growth drivers at a faster pace.” Fostering new growth drivers means creating new areas of growth through innovations in science and technology, industry, and real-world application scenarios. In essence, the goal is to generate more efficient and sustainable economic growth through innovation. The phrase “at a faster pace” underscores all the more the significance and urgency of this endeavor. It is imperative that real-world scenarios serve as the driving force for deeper integration of technological and industrial innovation, so as to promote the coordinated evolution of science, technology, and industry and give shape to a virtuous cycle of development.

Steps should be taken to further bolster the supply of advanced science and technology, so as to fortify the strategic foundation for fostering new growth drivers. In 2025, China’s research and development (R&D) spending reached 2.8% of GDP, exceeding the average among countries of the Organization for Economic Co-operation and Development for the first time. The share of basic research expenditure hit a record high of 7.08%, and China made its debut in the top 10 of the Global Innovation Index. All this indicates that the supply of advanced science and technology is becoming a crucial engine for developing new quality productive forces and cultivating new growth drivers for high-quality development.

That said, compared with top global leaders in science and technology, China still faces challenges, including a relatively weak capacity for original innovation and an insufficient ability to deliver disruptive “zero-to-one” innovations and breakthroughs in core technologies in key fields. Original innovation and basic research constitute the fundamental pathway for overcoming bottlenecks in core technologies in key fields, and once breakthroughs are made, they are likely to reshape the industrial landscape and market competition dynamics.

To produce more original advances, we should strengthen our self-sufficiency in scientific and technological infrastructure, as well as planning for strategic frontier fields, and build an enabling environment for original and disruptive innovation. Greater efforts should be made to achieve breakthroughs in core technologies in key fields and decisive whole-chain advances in key areas. Improving China’s innovation system is integral to developing institutions and mechanisms for supporting all-around innovation. Thus, it is important to formulate plans for the integrated development of education, science and technology, and human resources. Meanwhile, efforts should be made to build Beijing (the Beijing-Tianjin-Hebei region), Shanghai (the Yangtze River Delta), and the Guangdong-Hong Kong-Macao Greater Bay Area into international centers for scientific and technological innovation and turn them into world-class engines of innovation.

The overall capacity of China’s industrial system should be bolstered to create broader development space for new growth drivers. A modernized industrial system serves as the fertile ground and springboard for cultivating, developing, and harnessing new growth drivers. Through years of dedicated effort, China has largely built an industrial system that is vast in size, extensive in scope, and highly competitive. However, multiple industries are still neither strong nor sophisticated enough. Meanwhile, the global industrial system, along with its industrial and supply chains, is moving toward diversified layouts, regionalized cooperation, greener development, and accelerated digitalization—trends that reflect the underlying laws of economic development and the general tide of history.

A researcher examines a measuring rod at the experiment station of the Institute of Physics, Chinese Academy of Sciences, January 26, 2026. Chinese researchers successfully developed an all-superconducting user magnet with a central magnetic field strength of 35.6 teslas, setting a new world record for all-superconducting user magnets. PHOTO BY XINHUA REPORTER JIN LIWANG

Industrial upgrading and industrial relocation should be well coordinated in order to build a modernized industrial system that is self-supporting, risk-controllable, secure, reliable, and highly competitive. Every region and sector must be clear about its place within this system, remain committed to pursuing smart, green, and integrated development, and strive to foster a vibrant environment in which upstream and downstream industries are seamlessly connected, with all sectors playing to their respective strengths while pulling in the same direction.

In line with the principle of industry identifying needs and science and technology providing solutions, deeper integration between sci-tech innovation and industrial innovation must be pursued so the former can spearhead industrial upgrading. With a firm focus on the real economy as the bedrock of development, equal weight should be given to upgrading traditional industries and opening up new tracks in strategic emerging industries and industries of the future. The position of enterprises as the main drivers of innovation should be reinforced to ensure that scientific and technological advances can be turned into real-world productive forces at a faster pace. The AI Plus Initiative must also be further expanded to facilitate the integration and application of artificial intelligence across all industries and sectors, thereby giving rise to new forms of intelligent economy.

Efforts to develop application scenarios and make them more accessible should be redoubled, so as to provide more testing grounds for cultivating and developing new growth drivers. A scenario serves as a systematic pilot test for society, providing both the technical validation of technological products and the broader validation of business models, market potential, and institutional frameworks. As a bridge connecting technology with industry and R&D with the market, it serves as an important catalyst for bringing new technologies and products into commercial use at scale.

In recent years, China has successively introduced a series of policies and measures for scenario building. Localities have also achieved notable progress in their active experiments. Nevertheless, certain bottlenecks and obstacles remain. For instance, some research institutions and technology firms possess advanced technologies but lack precise insight into real market demand. Consequently, the products they develop often prioritize technical specifications over practical application. Some regions and departments treat high-value application scenarios as the “exclusive assets” of their own region or system, showing insufficient willingness or effort to open them up to the market, thereby hindering the large-scale rollout and application of new technologies and products.

In response, efforts should be made to improve access to scenario resources and promote their efficient and equitable use. The development of application scenarios in key areas should be accelerated, with support provided for creating comprehensive major scenarios, integrated industry-specific scenarios, and targeted high-value scenarios. Our goal should be to form pathways from technological breakthroughs to scenario validation, industrial application, and system upgrading, opening the way for the large-scale application of new technologies and products.

Boosting momentum and vitality through further reform and opening up

In recent years, China has steadily expanded the breadth and depth of its reform and opening up, providing a robust institutional guarantee for economic and social development. Strong momentum has been generated as a result of these efforts, which include the release of the Interim Guidelines on Building a Unified National Market, the enactment of the Private Sector Promotion Law, and the approval granted to 10 localities for comprehensive pilot reforms on the market-based allocation of production factors, as well as the implementation of the strategy to upgrade pilot free trade zones, the continuous shortening of the negative list for foreign investment access, and the expansion of the visa-free transit policy, which has sparked a “China travel and shopping” boom.

At present, China still faces many issues and challenges, both old and new, in economic development. Meanwhile, international economic and trade rules are being reshaped anew, and structural shifts in the global trade system are gathering pace. These factors make it all the more urgent for China to further tap the vitality of its institutions and mechanisms through continued reform in key areas and opening up at the institutional level.

Smooth flows should be promoted in the national economy by building a unified national market. In a world where markets are the scarcest resource, China’s vast market represents a distinct advantage for its economic development. Important arrangements for building a unified national market were set forth at both the 20th National Congress of the CPC and the third and fourth plenary sessions of the 20th CPC Central Committee. While positive results have been achieved on this front to date, many problems remain: rules and institutions in certain areas require further improvement, market development for production factors and resources is lagging behind, and local protectionism and market segmentation persist despite repeated prohibitions.

Faster progress should be made in establishing effective long-term mechanisms with the focus on improving rules and standards. Regulations on building a unified national market should be formulated to clear away the bottlenecks and obstacles standing in the way of its development. We need a foundational framework of institutions for a unified national market, with more refined underlying institutions in areas such as market access, fair competition, and quality standards. Efforts to regulate the economic promotion activities of local governments should continue, clearly defining what is permitted and what is not. To ensure order is maintained in market competition, a combination of regulatory means should be employed, including credit oversight, price enforcement, and measures against monopoly and unfair competition.

Deeper reforms must be advanced to fully stimulate the vitality of all market entities. Business entities are the primary participants in economic activity, the main providers of employment, and the chief drivers of technological progress. Vibrant business entities make for a vibrant economy. While their intrinsic drive has continued to grow in recent years thanks to a series of policies and measures, business entities still face certain problems and challenges. For example, the accelerating pace of technology upgrading and innovation across many sectors has made it increasingly difficult for companies to sustain the innovation needed to remain competitive. Another example is the market access barriers private firms still face in some sectors, including “glass doors” of access in name only, “revolving doors” of convoluted approval procedures, and “spring doors” of abrupt eligibility changes.

It is imperative to formulate and implement plans to advance reform of state capital and state-owned enterprises, in order to further clarify the powers and responsibilities of various governance entities and strengthen enterprise management systems, operational systems, and regulatory frameworks. The supporting regulations and policies for the Private Sector Promotion Law should be refined, and capable private enterprises should be backed in leading national initiatives to achieve breakthroughs in major technologies. Moves should also be made to leverage the specialized service capabilities of various innovation and entrepreneurship platforms, including national new- and high-tech development zones, sci-tech business incubators, and industrial clusters of small and medium-sized enterprises (SMEs), to promote the growth of SMEs that use specialized and sophisticated technologies to produce novel and unique products.

Institutional opening up should be advanced to create new prospects for mutually beneficial cooperation. Unlike opening up based on the flow of goods and production factors, institutional opening up centers primarily on rules, regulations, management, and standards. Comprehensive, systematic, and stable in nature, it stands as a hallmark of high-standard opening up and is crucial for advancing in-depth reform. At present, high-standard international economic and trade rules, as exemplified by the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and the Digital Economy Partnership Agreement, are setting a higher bar for market openness. Comparatively speaking, China still falls notably short in terms of its alignment with international rules, regulations, and standard systems.

To proactively align with high-standard international economic and trade rules, we must steadily expand institutional opening up. This involves further opening the service sector in a well-ordered way, optimizing the distribution of pilot free trade zones, taking solid steps to develop the Hainan Free Trade Port, and advancing negotiations to conclude more regional and bilateral trade and investment agreements. It is necessary to promote the integrated development of trade and investment and of domestic and foreign trade, deepen reform of the institutional framework for promoting foreign investment, and continue with efforts to make China a favored destination for foreign investment.

Redoubling efforts to ensure and improve public wellbeing

Improving the people’s wellbeing is the ultimate goal of development. During the 14th Five-Year Plan period, the per capita disposable income of residents nationwide grew at an average real rate of 5.4% per year; access to education at each educational stage reached or exceeded the averages of middle- and high-income countries; and the average years of schooling among the working-age population aged 16 to 59 rose to 11.3 years. Such new gains in public well-being are helping to generate more effective demand for economic development.

Improving public wellbeing is an ongoing endeavor; it requires continuous efforts to address weaknesses and shore up deficiencies. For instance, amid ongoing changes in social structure, social attitudes, and labor supply-demand relations, a growing number of workers are concerned not only about whether jobs are available, but also about whether those jobs are decent and desirable. Likewise, problems of insufficient supply, inadequate quality, and uneven resource distribution still exist to varying degrees in eldercare, childcare, and other areas.

The employment-first policy should be continued with a view to promoting high-quality and full employment. Employment is the most basic aspect of people’s wellbeing. During the 14th Five-Year Plan period, China’s employment landscape remained generally stable. With an average of more than 12 million new urban jobs created annually, China, as a large developing country of over 1.4 billion people, achieved relatively full employment in this period. Yet it must also be recognized that for some time to come, labor supply in our country will remain high. With the number of college graduates projected to reach 12.7 million in 2026, employment pressure remains considerable, while structural employment imbalances—reflected in such phenomena as jobs going unfilled even as jobseekers remain unemployed—have become more pronounced.

The All-China Federation of Trade Unions held the launch ceremony of the 2026 “Delivering Culture, Benefiting Workers” special initiative at the CBD Courier Service Station in Beijing on February 6, 2026. Representatives of model workers and craftsmen are pictured presenting their “Most Beautiful Smile” portraits. XINHUA / PHOTO BY WANG XIN

In light of this, China should double down on its employment-first policy orientation and launch initiatives to help enterprises keep workers on their payrolls, create more employment opportunities, and improve job quality. Employment of college graduates and other young people should be treated as a top priority. Channels should be kept open for rural migrant workers to seek employment away from or close to home, and the employment scale among people lifted out of poverty should be kept stable. At the same time, greater employment assistance should be provided to groups facing difficulties in finding jobs, with public-welfare positions serving as a safety net. At present, emerging industries and industries of the future are generating large numbers of knowledge-intensive occupations. It is therefore necessary to strengthen support for and guidance on entrepreneurship in order to unleash the job creation potential of new forms and models of business.

It is important to continue advancing work in areas such as education and healthcare. China has put in place the world’s largest education, healthcare, and social security systems. The retention rate for nine-year compulsory education, the enrollment rate for basic old-age insurance, and the coverage of basic medical insurance all exceed 95% of the population. However, when measured against people’s expectations, shortcomings remain in certain aspects.

Today, people not only hope to have access to schools, but aspire to quality education. Yet disparities in education between urban and rural areas, between regions, and between schools remain fairly pronounced; the supply of places in quality senior secondary schools and the availability of quality higher education resources both fall short of what is needed. Structural adjustments should be made to optimize the distribution of education resources and promote the transition from broadly balanced education to high-quality, well-balanced education, so that more children have access to quality education.

Advancing centralized medicine procurement and utilization is a key part of medical and health reform. Centralized medicine procurement should be refined, and reform of medical insurance payment models should be continued. Through coordinated reform and fine-tuned design on both the procurement and payment sides, the sustainability of insurance funds can be ensured, tangible benefits can be delivered to the general public, and the development of medical institutions and the vitality of biomedicine enterprises can both be boosted.

Eldercare and childcare services should be improved. In recent years, as population aging in China has progressed, the number of elderly people with physical or cognitive impairments has exceeded 45 million. Eldercare and health services face considerable challenges, as many elder-care facilities have irrational spatial layouts and weak safety foundations. An initiative to expand and improve rehabilitation care services should be carried out, and insurance schemes for long-term care put in place. Greater care and support should be provided to vulnerable groups, and the care system for seniors who are functionally impaired should be improved.

It is important to encourage positive views on marriage and parenthood and refine the policies and incentives for boosting birth rates. Coordinated efforts should be made to advance public-interest childcare and integrated nursery and childcare services, effectively bring down the costs of childbirth, parenting, and education, and better implement parental leave. These efforts will help ensure that the birth rate remains stable.

Preventing and defusing risks in key areas in a proactive and prudent manner

During the 15th Five-Year Plan period, China’s development environment is expected to undergo profound and complex changes. Strategic opportunities will exist alongside risks and challenges, and uncertainties and unforeseen factors will increase. The risks and challenges to be addressed and the issues and problems to be resolved will be more intricate than ever before. It is therefore necessary to give greater prominence to preventing and mitigating risks. We must strengthen security in the course of development and pursue development in a secure environment.

Solid steps should be taken to promote the high-quality development of the real estate sector, which features a long industrial chain and strong linkages with other sectors. It is thus imperative to properly manage the relationship between advancing development and mitigating risks. Over the past year, China’s real estate market has experienced fluctuations and adjustments as the downturn eased and stability was gradually restored. However, it should also be noted that there remains considerable room for the high-quality development of China’s real estate sector.

Efforts must be made on both the supply and demand sides to stabilize the market; city-specific policies should be adopted to control new housing projects, reduce stock, and increase the supply of quality housing; and the purchase of commodity housing stock primarily for use as government-subsidized housing should be encouraged. At the same time, reform of the housing provident fund system should be deepened, and the construction of safe, comfortable, eco-friendly, and smart quality homes should be advanced in a well-ordered way, so as to fully tap into potential demand for first homes and better housing. Coordinated steps should be taken to guard against risks, strengthen regulation, and advance development model innovations, thereby delivering faster progress in creating a new development model for the real estate sector.

An active and well-ordered approach should be pursued in addressing local government debt risks. On the whole, the Chinese government’s debt ratio remains within the reasonable range, and risks are manageable. Building on this and following the principles of sound classification and targeted debt replacement, it is necessary to scale up financial and fiscal support, improve the methods for debt restructuring and replacement, and adopt a combination of measures to mitigate the operational debt risks of local government financing platforms. Local governments should be urged to take the initiative in resolving their debts, and fraudulent practices in debt resolution must not be tolerated. Debt resolution is the means; development is the end. A unified long-term mechanism for government debt management must therefore be put in place so that we can resolve debts through development and pursue development in the process of resolving debts, optimize debt structures, and promote the market-oriented transformation of platforms and mitigation of debt risks.

Robust and systematic measures should be taken to prevent and mitigate financial risks in key areas. Finance plays a dual role in managing and dispersing risks, yet risk is built into its very DNA. While financial risks in China are generally under control, hidden risks in key areas such as small and medium-sized financial institutions cannot be overlooked. It is imperative to prudently address risks in small and medium-sized local financial institutions, strictly controlling debt expansion, reducing outstanding debts, and guarding against “risk blow-ups,” so that risks are steadily reduced.

(Originally appeared in Qiushi Journal, Chinese edition, No. 4, 2026)