Is China’s high-tech manufacturing growing?
The case for continued strength in China’s manufacturing and exports got a boost from two developments in late October: approval of a new Five-Year Plan proposal for China, and President Trump and President Xi’s agreement on tariffs.
The plenum of the Chinese Communist Party Central Committee approved the proposal for a new Five-Year Plan, the country’s 15th, covering 2026 to 2030. The plan calls for upgrades to traditional industries such as metals, chemicals, and textiles, and growth in emerging industries such as new energy. These goals will get broad-based support from all levels of government, from logistics to financing, helping exports to grow, the researchers find.
A final version of the Five-Year Plan, with economic targets, budgets, and other details, is likely to be approved by the National People’s Congress in March.
Is the US-China trade war still ongoing?
Shortly after the plenum and approval of the Five-Year Plan, President Trump and President Xi met in South Korea on Oct. 30. They emerged with a truce on trade, according to news reports.
The researchers note that not all aspects of the deal have been confirmed by both sides, but China’s use of restrictions on rare earth minerals appears to have dissuaded the US from imposing large tariffs of 100% or more. The meeting appears also to have yielded an agreement for the US to reduce other tariffs by 10 percentage points and loosen some export controls, while China agreed to a one-year postponement of rare-earth export controls and promises to purchase US soybeans.
China’s control over rare earths and other critical minerals has been an effective negotiating tool, and it will likely limit the ability of other countries to impose significant trade barriers against China in the future, the report finds.
“For the first time, China is positioned more as an equal,” Shan says on the podcast. “China has leverage that it can use to force the other side to postpone and pause these restrictions and tariffs,” she notes. “This is a very important signal to the market.”
What is the outlook for domestic consumption in China?
The plenum, where the Five-Year Plan was approved, reiterated the Chinese leadership’s goal of seeing per capita GDP reach that of a moderately developed country by 2035. This implies a real annual GDP growth rate of about 4.5% for 2026 to 2030, and the researchers suggest that the government’s stated growth goal is likely to remain around 5%.
Other encouraging news out of the plenum, Shan adds, were signals that the government will strive to raise the consumption rate—reducing the household savings rate—over the next five years. “They want to promote income growth along with economic growth,” she says.
“However, our takeaway is still that the top priority is to double down on the industrial system, on the technology self-reliance, and on becoming even more competitive in manufacturing and to outcompete global peers, gaining global market share,” she concludes.
Economic policies aligned with the objectives in the Five-Year Plan will probably lead the government to ease interest rates over the coming year. Our researchers are maintaining their forecast for monetary easing, with one 10-basis-point cut in the first quarter next year and another in the third quarter of next year, accompanied by fiscal expansion and credit growth acceleration.
Has China’s housing slump ended?
Among other important influences on China’s growth outlook, the property downturn will enter its fifth year in 2026 after the market peak in 2021. While there is still a long way to go before housing inventories are back in balance, our researchers conclude that the drag on growth will shrink.
New housing starts are 75% below the peak, and property investment is 50% lower, which means real estate’s share of GDP has fallen significantly. Even if the rate of decline remains the same, the impact of the property market’s downturn on the economy should become smaller in the next few years, the report concludes.
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Source: goldmansachs.com
