Chinese ambassador’s rosy pitch masks Xi’s top-down power play

After the 2025 that Beijing has had, the idea of it ending five-year plans and putting its fate more squarely in the hands of the free market is unthinkable.

Not long ago, China was openly debating getting rid of the decades-long policy of setting down five-year economic plans and the fixed annual growth targets that come with them.

The plans, economists complained, produced a kind of “GDP worship” to which Chinese officials invested mindlessly to meet targets and secure promotions, leaving huge debts and a despoiled environment in their wake.

That debate is now over and has been resolved firmly in favour of the plan. As one senior Chinese Communist Party official told me in Beijing last month: “Xi Jinping places great importance on this document.”

The reason for the reversion is straightforward enough, and it is not about nostalgia for the old days of Maoist central planning. For Xi, the five-year plan is not so much a policy document. It is a combined statement of political intent, national security strategy and ideological discipline.

Xi sees the world, and China, at a historic turning point, with Beijing on the verge of matching and possibly surpassing the US as an economic, technological and military power. The idea that Xi would put the Chinese economy more firmly in the hands of the free market at such a pivotal time is unthinkable.

Xiao Qian, China’s man in Canberra, was similarly on message in a recent Australian Financial Review article, extolling in detail the benefits of the 15th five-year plan to China, and to Australia as well. It will run from 2026 to 2030.

Xiao might be right that the plan will be good for Australia, in a narrow sense. As for the rest of the world – especially like-minded developed countries such as the US, Japan, Germany and South Korea – not so much.

The five-year plans, which form the core of socialist economic policymaking, were copied from the Soviet Union. China launched its first one in 1953, not long after the 1949 communist revolution. Xiao’s op-ed, much like the plans themselves, was stuffed full of weighty statistics recording annual increases in output and details of the sectors that Beijing will invest in.

Xiao’s statistical dexterity is a typical CCP flex. Chinese leaders flaunt their feats of memory by reciting statistics and word-for-word ideological canons, as it is the most politically safe way of communicating. The late former premier, Li Keqiang, was reputed as a student at Peking University to have recited up to 300 digits of the number pi from memory, a feat for which he was greatly admired.

But one part of Xiao’s article didn’t hit the mark. He argued that the next five-year plan was a product of grassroots consultation, both online (“3.1 million comments were received”) and in person, in multiple symposiums.

This is very much upside-down. The plan is not a bottom-up process. Like all policymaking in the Xi era, it is directed from the top down. Chinese state media is explicit about this. The design of economic policymaking under Xi is regularly described as one of “top-level design”.

Xi’s renewed focus on growth targets is not the only notable thing about the new plan. He has modified the economic policy of his early years in office, when he made high-speed growth subordinate to national security priorities. Right now, Beijing sees national security, or as an official Chinese report puts it, “intensifying global competition with ‘major powers’”, as requiring faster, not slower, growth.

By committing publicly to reach quantitative targets, Xi is also aiming to boost confidence in an economy that struggled coming out of the pandemic and which undershot the growth rates set for it.

But this is not the GDPism of old – of building more stuff, such as apartments, skyscrapers, airports and highways and the like. The latest plans are matched to Xi’s determination to dominate the high-tech and green industries of the future. In sectors such as electric vehicles, batteries and robots, China is already well in the lead.

For commodity-dominated countries such as Australia, that might be a good thing in the short term. Higher growth in China means more output of goods in an economy dominated by manufacturing rather than services. That, in turn, means continued healthy levels of steel production.

But the plan’s emphasis on pouring massive investment (and subsidies) into Chinese manufacturing to drag it up the value chain will have a disruptive impact elsewhere. Goldman Sachs, in a report in November, upgraded its estimates of Chinese growth for 2026-27 to 5 to 6 per cent, largely because the bank expects the already surging export sectors to grow even further.

Donald Trump’s tariffs have hurt low-margin, labour-intensive sectors such as clothing and footwear. But they haven’t quelled the growth in higher-value-added sectors such as semiconductors and auto. Growth in these sectors in China means a contraction elsewhere, in countries such as Japan, Germany and the US. Instead of getting cheaper toys and shoes, China is now sending the world cut-price cars and computer chips.

Xi will doubtless be looking back on 2025, the chaotic opening year of Trump 2.0, with satisfaction. As Jonathan Czin, a former CIA analyst now at the Brookings Institution, wrote in the latest Foreign Affairs: “By every measure, China is diplomatically, strategically and technologically better off than it was a year ago.”

In the next five-year plan, Xi thinks he has a formula to extend China’s advantage.