Key points
The changing century: Back in 2017, President Xi assessed, “the world is undergoing momentous changes of a scale unseen in a century”. Eight years on, the newly released draft 15th Five-Year Plan (FYP) asserts these changes have only intensified. In the years since Trump first took office, China has evolved from cautious engagement to an assertive deployment of its strategic levers — a confidence underlined by the recent Trump–Xi encounter, where the real bargaining power lay in Beijing’s control of critical resources. Driven by the changing geopolitical landscape and competition with the US, China has made conscious strategic choices that prioritise better preparedness for external shocks – a mandate that has profound impacts for macro policymaking.
From growth maximisation to resilience building: The core of the 15th FYP is a continuous strategic reset toward national resilience. The Plan’s top priorities – self‑reliance in key technologies and supply chains, and the development of innovative ecosystems – represent an explicit response to rising protectionism and geopolitical frictions. At the same time, elevating consumption as a principal growth engine reflects a long‑running shift toward more balanced, demand‑driven growth. None of this should be surprising given how the world has changed since the last FYP. The real question is: can China pull off this feat, delivering ambitious goals amid stiff internal and external headwinds.
Short-term policy stays the course: As a long-term development plan, the FYP is unlikely to affect how counter-cyclical policies are manoeuvred in the coming months. With the economy on track to meet this year’s growth target, the desire to keep some policy dry powder for next year is high. We think Beijing will continue to provide “just enough” support to keep the economic engine chugging along, heading into 2026.
Ramifications for markets: Major breakthroughs in AI, innovative drugs and advanced manufacturing have fuelled a strong rally this year, putting Chinese equities back on global investors’ radar. If the 15th FYP delivers on making China an innovation leader, these sectors could see further upside on strong earnings revisions and valuation re-rating. However, the FYP’s clear prioritisation of industry over household demand means the lagged consumption recovery could persist, tempering prospects for consumer-facing sectors. This, combined with caution towards “old China” - particularly real estate and its supply chains - leaves our overall market stance neutral. Government bond yields may stay range-bound as major monetary easing is postponed until next year. The CNY/USD may have more room to appreciate given expected US dollar weakness and a (possible) structural yuan revaluation.
