In the government plan for 2026, the No. 1 task is “building a robust domestic market”. Then comes accelerating technological progress. But longer-term, a plan for the next five years, gives more prominence to achieving advances in tech.
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The subtle difference highlights the government’s balancing act. Its overarching goal is to transform from a low-cost manufacturing to a tech-driven economy.
But a more immediate concern is dealing with a prolonged period of sluggishness that has depressed consumer and business confidence. China is such a large exporter that the choices it makes affect countries and jobs around the world.
The plans, presented at the recent opening of the National People’s Congress, offer a window into the government’s thinking. They are set to be formally endorsed by the rubber-stamp legislature at the end of the eight-day session on Thursday.
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Tech crucial to China’s future
Analysts believe technological prowess remains the far more important goal for Chinese leader Xi Jinping and his vision to build the nation into a major power that can contend with the United States on issues ranging from trade to Taiwan tensions.
Speaking to a provincial delegation at the National People’s Congress, Xi called for new breakthroughs, original innovation and “seizing the strategic high ground of science and technology”, according to a state media report.
China’s rapid growth into the world’s second-largest economy has lifted it to the level of a middle-income nation. To keep advancing, Xi has promoted polices that move the economy into higher-value industries.
A government-backed push into electric vehicles, for example, has transformed China into an emerging player in the global auto industry, while dovetailing with national climate goals.
The five-year plan vows to “target the frontiers of science and technology”, speeding up development in areas such as artificial intelligence, quantum technology, biotechnology and new energy.
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Moves toward self-sufficiency
The push has expanded and morphed as technology has evolved into an area of competition with the US, with national security implications.
The US has restricted the access of Chinese companies to the most-advanced technologies, including semiconductors that drive AI. The justification is that these parts can wind up in weapons at a time when the two countries are military rivals as well.
China’s government has responded by pouring resources into trying to develop these components itself as well as engineer ways to remain competitive with less advanced parts.
China must “fight the battle for key core technologies”, the five-year plan said. Specific goals, apart from AI, electric vehicles and robotics, include making advancements in semiconductors, batteries, biomedicine and 6G mobile networks.
The plan also pledged to expand production of China‘s homegrown passenger jet, the C919, and make breakthroughs in developing its own commercial jet engine. The US temporarily cut off the supply of Western-supplied engines for the C919 last year during an escalation in the trade war with China.
Rare earths — where China is the global leader — was highlighted as an area where it should maintain its competitive edge as the US and other countries seek to develop their own supplies of the critical elements for many advanced tech and military products.
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Trump’s tariffs
Even as China’s economy has cooled at home, rising exports have kept it growing overall. But tariffs imposed by US President Donald Trump have exposed the risk of relying too heavily on overseas markets.
China was able to shift exports to other markets, but that is facing challenges as its record trade surplus of almost USD 1.2 trillion raises alarm about the threat to factory jobs and the broader economies in other countries.
That has added impetus to China’s push to pump up consumer spending, so the economy is less dependent on outside forces.
“Facing a complex and challenging international environment, we must remain committed to the strategy of expanding domestic demand,” the annual economic plan said.
But for all the strong words, analysts say the effort appears aimed at keeping the economy afloat rather than boosting it. The annual plan sets a growth target of 4.5 per cent to 5 per cent for 2026, leaving room for a drop from last year’s 5-per cent rise.
Meanwhile, the government is primed to offer huge subsidies for high-tech advances in manufacturing, analysts said.
“Technological development and self-sufficiency remain central priorities, and industrial policy will continue to be deployed as an essential tool to achieve them,” economists at Capital Economics wrote in a research note.
Similar subsidies to the wind and solar industries led to manufacturing oversupply that was exported at rock-bottom prices, undercutting overseas competitors. The end result could be an even larger imbalance between China’s immense manufacturing capacity and its weaker domestic demand, further driving up its exports.
