Aerial view of the Beijing city skyline Photo: TUCHONG

The 15th Five-Year Plan (FYP) period (2026–30) links the past with the future, represeting a crucial stage for consolidating the foundations needed to basically realize socialist modernization and for advancing development across the board. Turning the grand blueprint of the 15th FYP into reality requires an accurate grasp of the historical position of this period and a clear understanding of the profound and complex changes unfolding in the development environment. An objective assessment of the current trajectory and potential of China’s economy is therefore essential. Clear recognition of these trends will allow policy efforts to be directed with greater precision, promoting both qualitative improvement and reasonable quantitative growth while laying a solid material foundation for decisive progress toward socialist modernization.

Historical patterns of development show that as industrialization enters a more mature phase and demographic structures shift toward an aging population, slower economic growth tends to emerge as an inevitable structural and stage-specific phenomenon. Examining China’s development trajectory, throughout the new period of reform, opening-up, and socialist modernization—amid deepening institutional reforms and a comparatively favorable international environment—the country’s development strengths were brought fully into play.

Between 1978 and 2012, China achieved an economic growth miracle unprecedented in world history. As socialism with Chinese characteristics has entered the new era, China’s economic growth rate has moderated compared with earlier decades, yet China has continued to rank among the world’s leading economies, maintaining a growth rate nearly double the global average during the same time period. The historical significance of socialism with Chinese characteristics in the new era likewise marks a new stage in China’s economic development.

Amid a complex and challenging international environment and demanding domestic responsibilities in the domains of reform, development, and stability, the Central Committee of the Communist Party of China (CPC), with Comrade Xi Jinping at its core, has upheld the general principle of pursuing progress while maintaining stability. By fully and faithfully implementing the new development philosophy on all fronts, China has accelerated the transformation of its economic development model, continuously optimized its economic structure, and methodically advanced the transition from traditional to new growth drivers. As a result, innovation and domestic demand have increasingly become the principal engines sustaining healthy economic growth.

Innovation & domestic demand

From the supply side, China’s economy is moving rapidly from reliance on traditional factors toward innovation-driven development. The structure of manufacturing continues to improve, innovation industries are concentrating more rapidly, and the proportion of modern producer services is expanding quickly. This evolution reflects a broader upgrading of the service sector—from traditional livelihood-oriented services toward a modern system characterized by technology and knowledge intensity. The deep integration of modern producer services with advanced manufacturing is becoming an increasingly important pillar of high-quality development. At the same time, amid the latest wave of global technological and industrial transformation, emerging industries, new business forms, and innovative business models in China are developing rapidly, displaying strong growth momentum.

From the demand side, the role of domestic demand in driving China’s economic development has become increasingly prominent. Between 2012 and 2024, domestic demand contributed an average of 93.5% to China’s economic growth, demonstrating the country’s strong endogenous capacity to maintain stable and relatively fast growth despite weak global economic momentum and rising uncertainty. Within domestic demand, final consumption contributed an average of 55.0% to economic growth during this period, consistently surpassing investment to become the primary driver. This highlights the continuing release of consumption vitality and its growing foundational role in the economy. Investment, meanwhile, contributed an average of 38.4% to growth in the same period, serving as a vital force underpinning economic expansion.

Inherent advantages

During the 15th FYP period, four main advantages will continue to support the Chinese economy’s long-term development potential.

One important foundation lies in the institutional strengths of socialism with Chinese characteristics. The defining feature of this system is the leadership of the CPC, which also constitutes its greatest advantage. Building a modern socialist country has long been the Party’s consistent objective. Since the founding of the People’s Republic of China, successive FYPs have been meticulously formulated and implemented in alignment with this overarching goal, exemplifying the distinctive political advantages inherent in socialism with Chinese characteristics. The Party’s leadership ensures that development planning remains firmly oriented toward the objective of achieving socialist modernization, enabling the optimal allocation of resources, the mobilization of broad social consensus, and strong organizational capacity for implementation. The institutional strength of mobilizing all resources to solve critical issues is particularly significant during the 15th FYP period, when strategic opportunities intertwined with risks and challenges, while uncertainties and unpredictable factors continue to proliferate. This system allows China to effectively mobilize national scientific and technological (sci-tech) resources in accordance with strategic imperatives, efficiently orchestrate research and development (R&D) in pivotal core technologies, and propel breakthroughs in core technologies in key fields and frontier technologies. Socialism with Chinese characteristics thus provides multi-dimensional impetus and safeguards for China’s economic development.

Another major advantage is the great potential of China’s vast domestic market. The country’s economic vitality and future opportunities are closely tied to the scale and dynamism of domestic demand. As economic development continues and household incomes rise, the consumer market retains considerable room for expansion. Although the era of large-scale, wave-like consumption has largely passed, consumption upgrading characterized by higher quality and greater value has become the dominant trend. Ownership rates of major durable goods have approached saturation, yet consumption vitality continues to emerge in many new sectors and business models. With incomes rising steadily, demand for services such as culture and recreation, communications and information, travel services, and transportation, is growing rapidly. These emerging trends reflect a broader shift in consumer priorities—from simple availability toward higher quality and better experiences. Unlocking this vast consumption potential therefore requires policies aligned with the current stage of development, including efforts to enhance purchasing power, improve consumption conditions, and create new, innovative consumption scenarios so that demand can be continuously transformed into growth momentum.

In terms of investment, the traditional “investment in physical assets” model of concentrating resources primarily in fixed assets is gradually losing effectiveness. Increasing attention is now being given to combining investment in physical infrastructure with investment in human development, achieving an organic integration of “investment in both physical assets and people.” By strengthening human capital accumulation, supporting innovation, and better meeting people’s aspirations for a better life, this shift can help unlock new domestic demand potential. Rising living standards are also generating growing demand for investment in areas such as childcare, education, eldercare, and healthcare. Such investments not only enhance social well-being but also help unleash the country’s talent dividend, providing strong support for improving economic quality while maintaining reasonable growth. A new investment paradigm that integrates “investment in physical assets” with “investment in people” can also synergistically reinforce consumption, continuously releasing domestic demand potential and injecting sustained momentum into high-quality economic development.

China’s comprehensive industrial system constitutes another key advantage, particularly in its ability to catalyze innovation momentum. The country’s interconnected industrial ecosystem serves as an important conduit for translating scientific and technological achievements into tangible productive forces and activating robust innovation capacity. With the world’s most complete and extensive industrial system, China not only benefits from efficient, low-cost, and risk-resilient manufacturing capabilities but also offers broad application scenarios and streamlined industrial coordination platforms for innovative endeavors. A holistic industrial ecosystem spans the entire innovation spectrum—from fundamental research and technological development to the commercialization of outcomes—expediting the progression from laboratory breakthroughs to pilot testing and ultimately to large-scale production. At the same time, seamless coordination and comprehensive support across the industrial chain create fertile ground for technology dissemination and industrial advancement. Synergistic collaboration among enterprises, the deep integration of regional industrial clusters, and the widespread availability of supporting services significantly reduce the costs of innovation diffusion while increasing the efficiency with which new technologies and products are adopted.

In strategic emerging sectors such as new energy, advanced manufacturing, biomedicine, and new materials, the convergence of technological innovation with advanced manufacturing is accelerating, continuously giving rise to new industries and business models while driving the upgrading of traditional industries toward higher-end, intelligent, and sustainable development. In this sense, the robust industrial ecosystem serves as an effective catalyst for scaling research outcomes from concept to commercialization, accelerating China’s economic evolution toward an innovation-driven growth model.

Finally, China’s abundant talent resources provide the essential foundation for innovation-driven growth. The deeper potential of China’s economic development increasingly rests on the powerful innovative capacity accumulated through its vast pool of talent. Economic development ultimately depends on sci-tech progress, and sci-tech progress in turn depends on talent. Talent cultivation relies on education, while advances in science and technology further strengthen both education and human capital. Education, technology, and talent therefore form a dialectically integrated and mutually reinforcing system that together supports the development of new quality productive forces and promotes high-quality economic growth. Supported by a large population base and the continued expansion of higher education, China has built the world’s largest higher education system and assembled a vast, high-caliber talent pool. The country now has more than 220 million skilled workers, including over 72 million highly skilled personnel, while the number of R&D personnel has ranked first globally for more than a decade. The ranks of basic research talent continue to expand, the number of highly cited scientists is rising rapidly, and a new generation of young sci-tech talent is emerging at an accelerating pace. Each year, more than five million graduates in science, technology, engineering, and mathematics (STEM) fields enter the workforce, continually injecting fresh vitality into technological innovation. This steadily expanding community of knowledgeable, skilled, and innovative professionals spans the entire chain from basic sci-tech research to the application of frontier technologies, providing crucial intellectual support for China’s emergence as an innovation forerunner across multiple domains while laying a solid human foundation for translating sci-tech breakthroughs into real productive forces.

Zhang Hui is a professor from the School of Economics at Peking University. This article is edited from People’s Tribune, issue 22 of 2025.