China: FYP aims for TFP growth and higher consumption - Standard Chartered

15th FYP to prioritize industrial upgrading and innovation to boost tech-driven growth. More spending to be directed towards household wellbeing to raise consumption's share of GDP. Fiscal policy will likely remain expansionary to support average growth of 4.5% from 2026-30. PBoC policy is likely to be supportive in a prudent framework while promoting the global use of RMB, Standard Chartered's economists report.

Envisaging a bigger push for domestic demand

"Proposals in formulating the 15th Five-Year Plan (FYP, 2026-30) and the related 'study guide' were released in late October, following the Fourth Plenum of the Chinese Communist Party (CCP). The thrust of the documents is broadly in line with our expectations. The government appears to be aiming for average growth of around 4.5% in the next five years, paving the way for doubling the 2020 per capita GDP by 2035. Total factor productivity (TFP) growth via innovation has been highlighted as the main driving force of growth, with emphasis on the importance of domestic demand amid external uncertainty."

"Industrial system modernisation tops the medium-term agenda, focusing on upgrading traditional industries and nurturing new growth engines. R&D is expected to be further promoted to achieve breakthroughs in core technologies. China also aims to maintain a reasonable share of manufacturing in the economy. Green transition is another area of focus, guided by the goal of achieving peak carbon emissions by 2030."

"The proposals underscore the role of domestic demand in boosting growth and aim to lift the share of household consumption in GDP. More public spending will likely be directed towards improving social security and household wellbeing to enhance their ability and willingness to consume. The proposals also call for a further opening up of the services sector to release the potential of services consumption. China also aims to increase the share of private investment, encouraging businesses to participate in major projects. Proactive macro policies will likely be implemented to stabilise growth, employment and expectations in the next five years. We expect fiscal policy to remain proactive to support economic transition. The monetary policy stance will likely be supportive, but appetite for ultra loose monetary policy remains low. China also aims to promote Renminbi (RMB) internationalisation"