China’s Manufacturing Focus Continues Amid US Tensions
The Chinese Communist Party is meeting this month to map a five-year vision that prioritizes high-tech manufacturing in its quest to upgrade industries and project global power as rivalry with the United States intensifies, according to reports from analysts. The meeting, known as a plenum, will produce a policy document for parliamentary approval in March that reportedly emphasizes support for technological research and industrial development.
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Conflicting Economic Goals
Analysts suggest China faces a fundamental policy challenge between boosting industrial prowess and stimulating household consumption. Industrial development requires channeling state resources to producers, while consumption growth necessitates redirecting funds to households, leaving less for business and government investment. According to the report, China’s growth over the past decade has prioritized manufacturing at the expense of consumption, creating deflationary pressures and unsustainable debts.
The intensifying rivalry between the China and United States, highlighted by renewed tariff threats from Donald Trump, has complicated matters for policymakers in Beijing. Sources indicate this represents a strategic choice to prioritize great power competition over addressing domestic growth imbalances.
Technological Sovereignty as National Priority
Chen Bo, senior research fellow at the National University of Singapore’s East Asian Institute, stated that the five-year plan will “definitely emphasise, and re-emphasise, support for high-tech research and industrial development.” According to his analysis, “When conflict arises, what ultimately matters is manufacturing, not services.”
The report references a July speech by President Xi Jinping published in Communist Party magazine Qiushi, where he described the world undergoing changes not seen in a century, making “technological revolution and major-country competition increasingly intertwined.” Xi called on the nation to secure the “strategic high ground” in the global tech race.
Economic Challenges and Domestic Imbalances
Beneath headline growth figures, analysts suggest China faces significant economic challenges including entrenched factory gate deflation, a property crisis, municipal debt concerns, industrial overcapacity, and record youth unemployment. Larry Hu, chief China economist at Macquarie, warned that “If you only rely on external demand and domestic demand is not working, then you will have unemployment problems and also deflation.”
Morgan Stanley analysts reportedly expect post-plenum statements to deliver a “tech- and supply-driven framework, with incremental focus on social welfare,” adding that “decisive reflation remains elusive in 2026.”
Limited Consumption Stimulus Expected
Despite previous five-year plans promising to boost consumption’s role in economic growth, households continue preferring saving over spending. The report states that Chinese households have seen their wealth eroded by the property crisis and confidence shattered by strict pandemic curbs.
One policy adviser, speaking anonymously, suggested social benefits will likely rise further in the next five years but improvements “won’t be particularly substantial,” citing limited social security budgets and tight local government finances. The adviser noted that after the property sector’s downturn, “we are unable to find new demand drivers.”
Global Context and Parallel Technological Developments
As China focuses on technological advancement, global tech developments continue rapidly. Recent industry reports highlight significant advancements including Apple’s M5 processor with enhanced capabilities, while quantum computing research progresses with MIT researchers developing new prediction frameworks. The AI sector also shows robust growth with NVIDIA’s DGX Spark AI supercomputer selling out instantly, and open-source development continues with the latest O3DE engine release delivering significant upgrades.
Long-Term Strategic Implications
Dan Wang, China director at Eurasia Group, expects the five-year plan to “focus more on people’s livelihood, including social security, healthcare systems, and possibly more support and protection for low-income groups.” However, she cautions that such language should “absolutely not” be read as a paradigm shift, noting that in what she describes as “a now very typical Marxist country, it’s all about production.”
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Analysts suggest China can manage its contradictory goals by tilting industrial support toward technology research rather than capacity expansion, while gradually strengthening the welfare system. The report indicates Beijing has recently rolled out consumer goods subsidies, childcare benefits, and small pension increases, with a recent top court ruling making social insurance contributions mandatory, laying groundwork for stronger welfare long-term.
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