Xi goes for broke in 15th FYP
Xi Jinping is going all in on industrial innovation and upgrading as the driver of China’s new economic growth model.
- That was our key takeaway from the Party’s 4th Plenum, which concluded on Thursday after deciding priorities for the upcoming 15th Five-Year Plan (FYP) (2026-2030).
We’ll have more analysis in the coming days – especially after the detailed “proposals” for the FYP and Xi Jinping’s explanatory speech are published.
But for now, it’s clear from the plenum communique that Xi’s top economic priority is to further invest in creating industries of the future – and upgrading the industries of the past.
- Indeed, efforts to “modernize” the overall industrial system and “upgrade” traditional industries were listed as the top priority in the communique.
Get this: Supporting industry is now seen as a higher priority than technological self-reliance, which is now the second priority after being #1 in the 14th Five-Year Plan.
And goal #3?
- “Building a strong domestic market and accelerating the establishment of a new development pattern.”
Our take: Point #3 is not about a pivot to boosting consumption.
- It’s about fashioning a genuinely new economic growth model – one that no longer relies on property-, investment-, and debt-fueled growth, but instead relies on world-class industries and technological innovation (goals #1 and #2).
- Higher household consumption may eventually be a part of that mix – but only as the outcome of more innovative and profitable companies that can afford to pay workers higher wages.
Get smart: This framing is very much in line with our thesis of how Xi is looking to manage China’s transition to a new economic growth model over the next decade.
The communique underscored this point, saying:
- “The 15th FYP will play an important role in connecting the past and the future in the process of achieving socialist modernization.”
Our translation: The next five years are make or break for getting China onto a fundamentally new development path.