Translated by Federico Emanuele
As 2026 begins, China faces a complex economic landscape defined by divergent macroeconomic signals and a rapid realignment of strategic priorities. Although growth showed resilience in the first quarters of 2025 —bolstered by robust exports and fiscal stimulus that pushed GDP growth to 5.2% year-on-year — the persistence of structural fragilities has gradually eroded this initial momentum. These include the prolonged real estate crisis, the worsening fiscal crisis for local governments, and the widespread climate of mistrust in the private sector. In this scenario, the 15th Five-Year Plan is introduced, for which guidelines have been published to date and whose final approval is expected in March 2026. The document aims not only to resolve structural criticalities but also to uproot inefficiencies in public investment and curb destructive domestic price wars, while simultaneously encouraging national enterprises to "go global" to escape domestic market saturation.
The guidelines for the 15th Five-Year Plan mark a historic break from the strategy of "growth at any cost" that has guided China since 1978. For the first time, economic security is elevated to the same level as prosperity, signaling the transition toward a "fortress economy". This approach, based on domestic innovation and supply chains shielded against geopolitical "storms," responds directly to Beijing's fears about technological dependence on foreign countries. In parallel, the leadership is attempting to balance this strategic closure with market reforms, such as the Private Economy Promotion Law of April 2025, to stabilize the productive fabric. However, a clear discrepancy between intent and reality emerges: actual liberalization has remained minimal and, in fact, national companies face strong pressure to localize supply chains, sacrificing efficiency on the altar of security.
With the 15th Five-Year Plan, China faces the dual challenge of revitalizing domestic demand and redefining its industrial strategy. Achieving development goals for 2035 depends on a complex transition toward an economy driven by consumption, which is however slowed down by the rapid aging of the population that increasingly burdens the pension and healthcare systems. Although the state attempts to support household incomes, efforts made so far have been insufficient to substantially change consumer behavior. Simultaneously, industrial modernization focuses entirely on "sectors of the future," such as quantum computing, 6G, and biomedicine. This transition, however, risks stalling on two previously mentioned structural obstacles: the fierce price wars that erode profit margins and the obsession with security, which risks cutting the Chinese ecosystem off from global research networks.
Furthermore, China's path is hindered by deep contradictions, starting with the never-resolved tension between market dynamism and state control. Additionally, according to analysts, the imbalance between a continuously expanding industrial supply and stagnant domestic demand remains critical: as consumption tends to shift toward services, the excess manufacturing production is not absorbed internally, generating structural trade surpluses abroad. The economic transition toward new productive sectors also entails high risks, as they do not yet have the scale or employment capacity to compensate for the collapse of old pillars of the economy, such as real estate. Added to all this is the problem at the level of execution: the ambitious reforms decided in Beijing often clash with the inefficiency and different administrative capacities of the provinces.
The repercussions of such a strategy manifest on two distinct fronts. At a global level, trading partners find themselves managing a deterioration of economic prospects as they are exposed to the excess production capacity of a China increasingly dependent on exports to sustain its growth. On the domestic front, the highest price is paid by the consumer. The resilience of families, already put to the test by rigid pandemic lockdowns, was definitively compromised by the bursting of the real estate bubble in 2021, which vaporized a significant share of private wealth and undermined confidence in the future. To this scenario of wealth fragility are added a structural employment crisis and youth unemployment at historic highs. In this scenario, the middle class witnesses the erosion of its standard of living, penalized by an economic model that systematically subordinates family welfare to the needs of industrial production.
Although the long-term goal remains the achievement of a "moderate prosperity" by 2035, the success of this agenda depends on the ability to replace jobs lost in the real estate sector with new opportunities in high-tech, a fundamental step to reabsorb youth unemployment and revive consumption. The stakes are high: the leadership's legitimacy is at play in this delicate balance. Failing the objective of shared prosperity, right in the middle of this security-centered turn, would risk fueling social discontent and testing the overall stability of the system.
Mondo Internazionale APS - All Rights Reserved ®2026