China's five-year plan targets AI, semiconductors, and tech self-sufficiency

The twin plans reflect a balancing act facing Chinese leader Xi Jinping: stabilizing an economy weakened by depressed consumer and business confidence while pressing a longer-term transformation into a technology-driven power capable of competing with the United States. Analysts said industrial policy will remain central to both objectives.

BEIJING — China’s National People’s Congress unveiled two major economic plans this week that lay out Beijing’s strategy for managing weakened domestic consumption and intensifying U.S. technological competition, according to the Associated Press.

The 2026 annual plan ranked “building a robust domestic market” as its No. 1 task, with accelerating technological progress listed second. The accompanying five-year plan gave greater prominence to technology as a long-term national objective — pledging to speed up development across artificial intelligence, quantum technology, biotechnology, new energy, semiconductors, batteries, biomedicine, and 6G mobile networks.

The annual plan set a growth target of 4.5% to 5% for 2026, leaving room for a decline from last year’s 5% pace, the AP reported.

Technology as strategic priority

Speaking to a provincial delegation at the congress, President Xi Jinping called for new breakthroughs, original innovation, and “seizing the strategic high ground of science and technology,” according to a state media report.

The five-year plan declared that China must “fight the battle for key core technologies.”

Analysts said the technology push remains the more important long-term goal for Xi even as near-term economic conditions demand attention to consumer spending. The government has backed a push into electric vehicles that transformed China into an emerging player in the global auto industry, and the new plans extend that industrial-policy approach across a broader range of sectors.

“Technological development and self-sufficiency remain central priorities, and industrial policy will continue to be deployed as an essential tool to achieve them,” economists at Capital Economics wrote in a research note cited by the AP.

U.S. competition and self-sufficiency

The technology goals have expanded as semiconductors and other advanced components became an area of rivalry with national security dimensions, the AP reported. The U.S. has restricted Chinese companies’ access to the most advanced chips, including those used to drive artificial intelligence systems, on grounds that the components could reach Chinese military programs.

China has responded by directing resources toward developing those components domestically and finding ways to remain competitive with less advanced parts, according to the AP.

The five-year plan also pledged to expand production of the C919, China’s homegrown passenger jet, and make breakthroughs in developing a domestic commercial jet engine. The U.S. temporarily cut off the supply of Western-supplied engines for the C919 last year during an escalation in the trade war, the AP reported.

Rare earths — where China holds a dominant global position — were highlighted as an area where Beijing should maintain its competitive edge as the U.S. and other countries seek to develop alternative supplies of the materials used in advanced technology and military products.

Domestic demand and the tariff pressure

China’s record trade surplus of almost $1.2 trillion has raised concern among trading partners about risks to factory jobs and broader economies, the AP reported. Tariffs imposed by President Donald Trump have exposed the risk of relying too heavily on overseas export markets, adding pressure on Beijing to cultivate domestic consumer demand as a buffer.

The annual plan said: “Facing a complex and challenging international environment, we must remain committed to the strategy of expanding domestic demand.”

Analysts told the AP, however, that the domestic spending effort appeared aimed at keeping the economy from contracting rather than driving expansion. The same industrial subsidies the government plans to deploy for high-tech manufacturing could mirror the approach used in wind and solar energy — which produced manufacturing oversupply exported at low prices, undercutting overseas competitors and widening the gap between China’s large manufacturing capacity and weaker domestic consumption.

The plans were presented at the opening of the NPC session and are set to be formally endorsed by the legislature at the session’s close on Thursday, the AP reported.