HONG KONG (AP) — China’s leaders have vowed to reduce its reliance on foreign advanced technology and spur stronger domestic demand as it weathers “high winds” amid elevated trade tensions with the U.S.
An outline of the ruling Communist Party’s blueprint for the next five years was laid out in a released Thursday after a in Beijing, just days ahead of planned talks between Chinese leader Xi Jinping and U.S. President Donald Trump.
Five-year plans are a throwback to the days of Soviet-style central planning. China still relies heavily on them to map out policy priorities and decide on funding. Party “plenum” meetings like the one held this week also are used to rally the party rank-and-file around Xi’s leadership.
Thursday’s announcement signaled no major policy shifts. Despite mounting trade tensions, China intends to remain a global manufacturing power while sustaining strong economic growth at home.
China gains confidence in the trade war
China is facing “profound” changes and growing uncertainties, said the communique released by state media.
It does not refer directly to the between Beijing and Washington, but warns of rising “uncertainties and unforeseen factors”.
“We must proactively identify, respond to, and steer changes… and dare to brave high winds, choppy waters, and even dangerous storms,” it says.
Han Wenxiu, a senior party official overseeing policy making in financial, economic and rural affairs, told reporters Friday that China is well placed to handle such risks, saying “there is always opportunity in crisis and crisis can be turned into opportunity.”
Chi Lo, an Asia Pacific senior market strategist at BNP Paribas Asset Management, said the emphasis on substantial improvements in scientific and likely reflects greater confidence that China is less vulnerable to pressure from the trade war.
The party vowed to achieve “markedly stronger” international influence, economic and national strength by 2035 and to “safeguard the multilateral trading system,” portraying Beijing as a defender of free trade, noted Leah Fahy, a China economist at Capital Economics.
Domestic economic challenges remain
China’s communique emphasized the need to build a “robust” domestic market by expanding domestic demand and increasing consumer spending.
A downturn in the property sector that began while China was still in the midst of disruptions from the COVID-19 pandemic has sapped consumer confidence, hurting household wealth and causing widespread layoffs.
To try to spur demand, the government has encouraged investment in more modern factories and equipment and paid subsidies to people who replace old appliances and vehicles with newer ones. But manufacturing capacity exceeds demand in many industries. That has caused damaging and led companies to boost exports, in turn adding to trade friction.
Even with strong government support, the economy in the last quarter. And factory activity shrank for the in September, official data showed, as domestic demand remained sluggish.
China’s leaders have kept their goal of attaining the status of a “mid-level developed country” and doubling the size of the economy in 2020 by 2035.
That implies an average annual growth rate of about 4-5% in the next decade, said Lynn Song, chief economist for Greater China at ING Bank.
China will remain a manufacturing juggernaut
China is the world’s biggest manufacturer, accounting for roughly 30% of global manufacturing output and about a quarter of its overall economy. The new 5-year plan calls for keeping manufacturing at an “appropriate level” with advanced industries as the backbone, according to the communique.
That signals China’s focus on the manufacturing sector “will remain a top priority, even in the face of overcapacity (and) price wars”, said Capital Economics’s Leah.
Over the years, Chinese manufacturing has progressed from labor-intensive, low-cost production to higher-value products including electric vehicles, robotics and batteries. In coming years, the emphasis will be on advanced manufacturing, said Robin Xing, chief China economist at Morgan Stanley.
That includes areas such as quantum technology, biomanufacturing, hydrogen and nuclear fusion energy, artificial intelligence and next generation mobile communications, said Zheng Shanjie, head of the National Development and Reform Commission, Beijing’s main planning agency.
“These industries are ready to take off,” Zheng said. “It means that in the next 10 years we will build another high tech industry in China and this will inject continued impetus to our efforts to achieve Chinese modernization.”
Zheng noted that building a stronger domestic market is a strategic priority.
“The economies of major countries are all driven by domestic demand and the market is the most scarce resource in today’s world,” he said.
It’s unclear if China’s commitment to catalyzing more consumer spending and domestic investment will make much of a dent in its exports.
China’s share of EV sales globally reached 46% in 2023, according to Morgan Stanley, and major Chinese companies like BYD and CATL have taken up global leading positions in battery technology and production.
China holds a pivotal role in global supply chains and its strategic control of access to rare earths, materials used in many products.
“The Chinese government sees manufacturing as a core issue in security and geopolitical leverage over other countries,” added Gary Ng, a senior economist at Natixis.
Xi continues to centralize power
The four-day plenum was marked by relatively low attendance.
Out of 205 full members in the elite Communist Party central committee, only 168 were there, along with 147 of its 171 alternate members, according to the communique.
That reflects an “unprecedented proportion of central committee members are in political trouble” amid Xi’s deep purges within the party, said Neil Thomas, a fellow at the Asia Society Policy Institute’s Center for China Analysis.
The biggest personnel changes were the promotion of Gen. Zhang Shengmin to be China’s second highest ranking general. He replaced He Weidong, who was from the party along with eight other senior officials in Xi’s latest anti-corruption drive.
The changes indicate an emphasis on political loyalty and anti-corruption under Xi, said Sun of King’s College London. As the party continues to centralize power, “the political position faced by Xi and his dominance within the party is still relatively secure” said Sun.
___ Wu reported from Bangkok and Moritsugu reported from Beijing. Associated Press researchers Yu Bing and Shihuan Chen in Beijing contributed.
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