By Liu Shijin | China Daily
After more than three decades of rapid expansion, China’s economy reached a cyclical peak in the first quarter of 2010 and has since gradually shifted into a phase of medium-speed growth, with the binding constraints on growth evolving from supply shortages to demand insufficiency.
From a comparative international perspective, China is now positioned in the income range where per capita GDP exceeds $10,000 but has yet to cross the threshold into high-income economies, remaining in this transitional band for several years.
Historical experience suggests that economies at this level often enter a structurally sensitive and relatively unstable phase of development, where growth patterns and structural dynamics undergo notable adjustment.
Against this backdrop, the outline of the 15th Five-Year Plan (2026-30) highlights the pivotal role of this period in advancing the process of basically achieving socialist modernization.
It has been identified as a key stage for consolidating development foundations and pushing forward comprehensive efforts, with a focus on strengthening comparative advantages, removing structural bottlenecks and addressing weak links.
In essence, the objective is to secure strategic initiatives amid intensifying global competition, achieve major breakthroughs in strategic tasks central to Chinese modernization, and lay a more solid foundation for the realization of basic socialist modernization.
Among the structural challenges facing the economy, insufficient consumer demand remains the most pressing. While China’s current development context is markedly different, the interaction between income disparity and an incomplete social security system continues to mirror structural patterns observed in earlier stages of development, thereby reinforcing demand-side constraints.
At the same time, China’s growth drivers are undergoing a profound transformation as the economy enters a new development phase. In this process, three categories of advantages stand out.
The first is the latecomer advantage in economic catch-up, which is relatively low-cost and easier to realize, but requires sustained openness, humility and a willingness to learn.
The second is the advantage emerging from a new wave of technological revolution characterized by digitalization and green transformation, in which China has already reached either a parallel or leading position in certain areas, with the key challenge lying in maintaining and strengthening this momentum.
The third is the advantage of an ultra-large-scale economy, which extends beyond the consumer market to encompass production, investment, trade, innovation, finance and monetary circulation, representing a dimension that has often been underappreciated but holds substantial long-term potential.
Taken together, China is currently in a critical window of structural transformation and growth momentum switching, with far-reaching adjustments expected across consumption, industrial structure, foreign trade, investment, financial systems, urban-rural relations, intra-urban structures, and income distribution.
The quantitative expansion that defined the high-growth era is gradually giving way to a development model oriented toward higher technological content, greater value added, and stronger sustainability.
Within this transition, effectively identifying and leveraging the three aforementioned advantages, while advancing strategies such as building a manufacturing powerhouse, a consumption powerhouse and a financial powerhouse, will be essential for achieving structural upgrading and long-term development goals.
In this context, structural reform remains the fundamental instrument for sustaining economic momentum. At its core, reform begins with further ideological liberation, removing institutional constraints that hinder the high-quality development of productive forces and suppress social creativity and vitality.
Although reform inevitably involves the adjustment of interest relationships and requires balancing diverse concerns, certain principles remain paramount: local interests must serve the broader national agenda, and short-term or narrow gains must yield to long-term collective welfare.
Vulnerable groups, in particular, must be adequately protected in the process. Ultimately, reforms aligned with long-term systemic objectives will benefit all members of society.
Historical experience also shows that timing is crucial, as reforms are often delayed under favorable conditions and implemented at higher cost when pressures intensify. This underscores the importance of proactive adjustment.
An enabling environment that is open, tolerant and supportive of initiative is therefore essential, with the principles of respecting labor, knowledge, talent and creativity playing a key role in unleashing innovation and entrepreneurial vitality, as emphasized in the outline of the 15th Five-Year Plan.
Looking ahead, the 15th Five-Year Plan period marks a decisive stage in China’s transition toward high-income status and the consolidation of socialist modernization.
Unlike earlier phases characterized primarily by incremental adjustments within a relatively stable growth framework, this stage requires the establishment of a new growth framework, as both external conditions and internal dynamics — including demand, supply and growth drivers — are expected to undergo profound and even structural shifts.
In particular, consumption is set to play a more prominent role, as China’s consumption-to-GDP ratio remains approximately 20 percentage points below the international average, indicating a significant structural gap that needs to be addressed.
Consumption upgrading will not only involve domestic goods and services, but also greater engagement with foreign products and services, thereby enhancing the internationalization of consumption patterns.
At the same time, development-oriented consumption in areas such as education, healthcare, elderly care and cultural, sports and entertainment services should increasingly be viewed as investment in human capital, contributing to improved labor quality and stronger innovation capacity.
In this sense, consumption is expected to move to the forefront of growth policy, gradually shifting emphasis away from investment as the primary stabilizing force.
Industrial restructuring will follow a similar logic of transformation. The development of a manufacturing powerhouse does not necessarily imply an increasing share of manufacturing in GDP; in fact, this share may continue to decline as the economy evolves.
The key focus lies instead in the development of high-tech and knowledge-intensive producer services that support manufacturing upgrading.
The integrated system of “manufacturing plus related producer services” provides a more accurate reflection of industrial transformation, capturing both technological self-reliance and innovation-driven growth.
Meanwhile, the upgrading of consumer services will be concentrated in sectors such as education and training, healthcare, information services, financial services and human resource services.
As economic complexity increases, traditional experience-based industrial policy becomes less effective, making a fair and competitive business environment increasingly important.
Legacy industries formed during the high-growth period, particularly in heavy and chemical sectors, will require substantial capacity adjustment, with the exit of inefficient production relying on both market mechanisms and policy coordination.
In foreign trade, despite a more challenging external environment, China’s continued export strength reflects rising industrial competitiveness.
However, a sustained large trade surplus also implies relatively lower domestic consumption, and therefore reflects, and reinforces, consumption insufficiency.
In the long run, such imbalances are not sustainable. This necessitates a more balanced trade strategy that maintains export competitiveness while expanding imports, alongside a greater share of trade settlement in renminbi.
This shift implies moving from foreign exchange accumulation toward broader RMB internationalization, enhancing its global liquidity and usability.
As the use of RMB expands internationally, its functions should increasingly align with the scale of China’s real economy, which may in turn support RMB appreciation, improving productivity and reinforcing competitive upgrading over the medium to long term despite potential short-term pressure on exports.
Financial structure will also undergo significant evolution. As industrial upgrading deepens and knowledge intensity increases, the financial system is expected to shift from bank-dominated intermediation toward capital-market-led allocation.
With the declining appeal of real estate and traditional savings instruments, household wealth is likely to flow more actively into capital markets, providing greater liquidity and supporting a new stage of financial development.
Ultimately, the objective is to support a steady transition toward a development path that facilitates China’s progression toward high-income status and the realization of socialist modernization.
**The writer is vice-chairman of the China Development Research Foundation and deputy director of the Committee on Economic Affairs of the CPPCC National Committee.
The views do not necessarily reflect those of China Daily.
