China's Rise: A Threat to Global Industrial Capacity in Emerging Technologies

China's 15th Five-Year Plan (FYP) 2026-2030: A Shift in Focus

The National People's Congress has set a 4.5-5% annual growth target for 2026, the lowest since 1991, as part of China's efforts to double GDP by 2035. The real story, however, lies in the technological ambitions embedded in the FYP, which prioritizes New Quality Productive Forces (NQPFs), a narrow set of emerging sectors that will drive growth and technological self-reliance.

Key Themes in the FYP

Two themes emerge from the FYP:

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1. R&D Growth Target: A binding 7% growth target, a marginal decrease from 9.1% the previous year, with a focus on NQPFs, including quantum technology, biomanufacturing, hydrogen and nuclear fusion power, brain-computer interfaces, embodied AI, and 6G mobile communications.
2. Addressing Involution: The FYP explicitly points to the pathological problem of involution in sectors such as electric vehicles, semiconductors, batteries, humanoid robots, and satellites, which is a result of China's investment-led export-oriented economic model.

Tension and Contradiction

By doubling down on NQPFs, the FYP deploys the very instruments that unleash and exacerbate the consequences the state is trying to rein in. This tension and contradiction arise from the unique ability of China's model to mobilize vast resources through a centralized and top-down approach, but at the cost of waste, inefficiency, corruption, mismanagement, and structural overcapacity.

Impact on Priority Sectors

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Several priority sectors, including the EV industry, have been dropped from the FYP, with the government seeking to phase out subsidies by 2027. Artificial Intelligence, the most repeated theme in the FYP, is likely to emerge as a key candidate for investment, as local officials seek to unlock growth through investment.

Economic Data

China's Fixed-Asset Investment declined by 3.8% in 2025, a first in three decades, signaling restraint in investment. However, whether this is a reflection of deflation in the macroeconomy or clever accounting remains to be seen.

Policy Mandates

The FYP mandates limiting supply-side production incentives through capacity regulation, price governance, and other measures to curb "irrational capacity expansion."