As China begins its 15th Five-Year Plan period, it faces a mix of old and new challenges, both domestic and international. The key question is how to fully tap into the country's economic potential, strengthen internal capabilities, and seize opportunities for growth. The recommendations for the 15th Five-Year Plan outline major socioeconomic development goals, including achieving significant progress in quality development, substantially enhancing self-reliance in science and technology, and making new breakthroughs in deepening reform across the board. How can domestic demand continue to strengthen as the main driver of economic growth? What steps should be taken to closely integrate efforts to boost consumption, invest in physical assets, and invest in human capital? How can a modern industrial system be constructed? How will high-level sci-tech self-reliance be realized? Recently, a special report series titled “Advancing with Momentum” has been launched, featuring dialogues with six economists on new expectations for China’s economy during the 15th Five-Year Plan period.
Regarding enhancing innovation capacity, coordination between state power and private capital is necessary. According to the plan recommendations, building a modern industrial system and accelerating high-level sci-tech self-reliance are top priorities. Lu Ming, Distinguished Professor at Shanghai Jiao Tong's Antai College of Economics and Management and Executive Dean of the China Development Institute, believes that enhancing innovation requires cooperation between state and private sectors. “In certain specific areas, a national system remains important,” Lu noted. For instance, in key sectors requiring large investments with high uncertainty—such as basic talent reserves and hardware infrastructure—private capital may lack the scale, especially when financial markets are underdeveloped, making it difficult to pool private funds for major innovations. “In such cases, state power is still very important.” While the state plays a major role in driving progress, mass innovation is also crucial. In areas not requiring huge investments or strong public goods characteristics, private capital can leverage its advantage in information screening to identify various market innovations, select promising projects, and earn corresponding risk returns. “Therefore, coordination between state power and private capital is essential.” Lu emphasized that local governments should improve the business environment, policy stability and predictability, talent attraction, and the release of various application scenarios to promote technological progress. Different regions should form a unified national market, choosing differentiated development paths based on their comparative advantages. Failed projects should be eliminated by market forces, and local governments must avoid using resources to protect market failures.
Shi Jinchuan, Director of the Private Economy Research Center at Zhejiang University, Senior Professor of Liberal Arts, and Deputy Director of the Zhejiang Provincial Government Advisory Committee, views innovation-driven development as the main theme for the next five years. Private enterprises are at the forefront of scientific, technological, and industrial innovation, serving as the main force in developing new quality productive forces. “During the 14th Five-Year Plan period, the biggest change in China’s private economy was truly entering the ‘creative destruction’ phase described by Schumpeter,” Shi said. In the early stages of creative destruction, many people experience the disruptive pain of innovation replacing old technologies, industries, and business models, without yet fully feeling the gains from innovation. Over the next five years, as creative destruction continues, innovative achievements will accumulate, their influence will spread, and their ability to empower numerous industries will keep rising. The sense of fulfillment will gradually outweigh the pain.
On boosting consumption, the key lies in increasing residents’ incomes. Insufficient effective demand is a critical issue in current economic work. Stimulating domestic demand, especially consumption, will be a major task during the 15th Five-Year Plan. Liu Qiao, Dean of the Guanghua School of Management at Peking University and Professor of Finance, argues that breaking the “low price–low profit–low income” cycle is necessary to boost domestic demand. China’s manufacturing sector has strong production capacity, leading to oversupply in某些 areas, which pressures firms to compete on cost, squeezing profits and making it hard to offer higher wages. Since labor income is the largest source of disposable income for residents, people are reluctant to spend heavily on goods or services under these conditions. “This creates a cycle that is unfavorable for high-quality economic development in China.” He suggests that local government performance evaluation systems should focus more on investing in people, incorporating indicators like disposable income and consumption rates that reflect resident well-being and satisfaction. Using income-based GDP accounting, with labor compensation and corporate profits as core metrics, and making data public, would guide local governments to govern for the people, paying more attention to improving the business environment, corporate profits, and resident incomes.
Many experts interviewed believe that raising residents’ incomes is crucial for boosting consumption. Dong Yu, Executive Vice President of the China Institute for Development Planning at Tsinghua University and Vice President of the China Private Economy Research Association, expects a urban-rural resident income growth plan to be a focal measure in the next phase. “I believe the income growth plan will, on one hand, introduce reforms in income distribution, and on the other, include measures to ‘grow the pie,’ such as stabilizing and expanding employment, especially providing high-quality, sufficient job opportunities. Additionally, by investing in people, enabling them to develop better and earn higher incomes. Furthermore, stronger social security support for urban and rural residents is likely. Through systematic economic and social measures, the goal of increasing resident incomes can be achieved.”
On combining investment in physical assets and human capital, the focus should be on addressing pain points at various stages of human development. The plan recommendations propose expanding effective investment and closely integrating investment in physical assets with investment in human capital. Dong Yu stated that truly combining the two requires considering the entire chain of human development, addressing various needs and targeting pain points at different life stages to identify integration points with physical investment. Zhang Xiaojing, Director of the National Institution for Finance & Development, believes efforts to advance “investing in people” should focus on four areas: first, strengthening the social security and safety net, promoting equal access to basic public services, and boosting development-oriented consumption; second, optimizing the structure of fiscal expenditure to enhance the recognizability of spending related to investing in people; third, increasing state-owned capital operating profits to replenish social security funds and the livelihood protection system; fourth, revitalizing government存量 assets to improve operational efficiency. “It is important to note that unlike investment in physical assets, which forms relatively fixed tangible assets, investment in people creates mobile human capital, which reduces local governments’ enthusiasm for such investment,” Zhang said. Therefore, given the strong positive externalities of investing in people, central government input should be greater; meanwhile, performance evaluation mechanisms for local “investing in people” should be more sound.
Regarding the real estate market, a more supportive stance may be beneficial. Liu Qiao views many current issues as related to real estate and advocates for healthy development of the sector, making market stabilization and recovery a key part of boosting domestic demand in 2026. In the short term, fiscal and financial policies may need to provide liquidity support for the real estate market, and the government’s attitude should be more proactive. Long-term reforms could involve transitioning real estate enterprises from a developer model to an operator model. “Currently, real estate’s contribution to the economy generally refers to development investment, but housing consumption is a significant part of service consumption, and its share in GDP is very low.” In the future, providing high-quality housing supply could make residents more willing to rent rather than only buy. Real estate firms could then shift to an operator model, offering effective service consumption, which is an important reform on the supply side of service consumption. “The real estate market’s role in driving the economy could shift from单纯 investment-led to jointly driven by investment and consumption. In the long run, this may represent a new model for Chinese real estate.”
On private sector development, the top priority is transitioning from policy-based to law-based governance. Discussing how to better develop and expand the private economy during the 15th Five-Year Plan period, Shi Jinchuan emphasized that vigorous efforts must be made to shift the institutional guarantees for private economic development from policy dividends to rule-of-law dividends. “Establishing a legalized business environment for the private economy requires, above all, replacing policy governance with legal governance.” Shi stressed that the government must correctly handle institutional innovations in private sector innovation, explore new rules in emerging fields, and prudently adjust and introduce policies. It must continuously advance compliance reforms in judicial procedures involving enterprises and severely crack down on violations of private enterprises’ legitimate rights and interests. Legal protection for private enterprises’ autonomous management rights, intellectual property rights, personal and property safety of entrepreneurs, and innovative optimization of market regulation and service methods must be strengthened in step with the times.
Dong Yu believes that consistently releasing favorable policy expectations for the broad private economy is essential. “In the past, and even now, some factors affecting private enterprise expectations arise from negative impacts of certain statements during policy transmission. In the future, more attention should be paid to building a favorable舆论 environment, placing it on par with policy environment construction.”
On the RMB exchange rate, strong support comes from China’s economic fundamentals. Recently, accelerated RMB appreciation has drawn global market attention. Zhang Bin, Deputy Director of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences, views the RMB as fundamentally a strong currency based on China’s economic fundamentals. “The trade sector underpinning the RMB has progressed relatively quickly; China’s economic fundamentals, especially in manufacturing, are strong, with prominent global competitiveness, providing solid support for the RMB exchange rate, a trend likely to persist.” “However, in financial markets, exchange rates also have financial asset attributes, influenced not only by import-export trade but also critically by the effectiveness of policies to expand domestic demand,” Zhang said. If domestic demand expansion proves more effective, making RMB-denominated assets like stocks and real estate more attractive to investors, it would bolster the RMB exchange rate further, consolidating its strong currency status. But if weak domestic demand persists, keeping returns on RMB assets low and unattractive to investors, the RMB could weaken.
Comments