Outlook on China’s 15th Five‑Year Plan

Yin Yanlin (former Central Financial and Economic Affairs Commission Office), Liu Yuanchun, and Lu Feng on service consumption, AI, and fiscal reform

As the State Council held a series of press releases for the accomplishment of the 14th Five-Year Plan, it’s setting the stage for the upcoming 15th. While the central government has yet to release a draft, I think it’s the right time to glean insights from policy recommendations by leading Chinese economists. I'd like to share the perspectives of three influential voices: Yin Yanlin尹艳林 (former Deputy Director of the Central Financial and Economic Affairs Commission Office), Liu Yuanchunl刘元春 (President of Shanghai University of Finance and Economics; economist), and Lu Feng卢锋 (Professor of Economics at Peking University's National School of Development).

I picked these three economists specifically because of their proximity to China’s decision-making system and their practical policy orientation. Yin comes from within the system itself; Lu and Liu frequently engage in policy design debates tied to implementation realities. Liu briefed Xi during the Politburo group studies sessions about the capital market governance in 2022. In other words, they know how policy actually gets made and executed in China.

After reading through their outlooks, I’ve identified several converging themes that likely signal the policy direction of the 15th Five-Year Plan:

The Demand-Side Challenge

China has made remarkable strides in supply-side capabilities, yet the primary macroeconomic constraint has shifted decisively toward demand—particularly weak final consumption, with services lagging furthest behind. Lu Feng notes that China’s traditional adjustment strategy of “more investment, capacity reduction, and export expansion” is yielding diminishing returns, hampered by declining investment efficiency and an increasingly challenging external environment. The 15th Five-Year Plan should therefore pivot from “strong supply, weak demand” to achieving strength in both, elevating consumption expansion to equal priority with innovation and industrial upgrading. Lu even suggests the government set a clear target to increase the consumption rate by 5–10 percentage points during the 15th Five-Year Plan. Yin also puts boosting demand at the top of the policy checklist, calling for the elimination of policies that restrict consumption. Liu Yuanchun adds a complementary lens: expanding demand must be achieved not through one-off stimulus but via income distribution reform, social protection expansion, innovation in consumption scenarios, and removing service supply bottlenecks—especially in healthcare, elderly care, cultural and recreational services.
My take: The "consumption rate" indicator will likely be incorporated into the 15th Five-Year Plan targets, and we may not see a clear GDP target set, similar to the 14th. As such proposal also appears in the recommendations of Peng Sen彭森, former Vice Chair of the NDRC and President of the China Society of Economic Reform. He suggests raising the final consumption rate by 5-8 percentage points over five years. We also see that in the Aug.27 interviews ChinaNews conducted with Bai Chong-En白重恩, Dean of the School of Economics and Management at Tsinghua, he said

“Making residential consumption growth one of the important assessment indicators is very important for us to achieve long-term, balanced growth.”

Rebalancing Public Resources

A central recommendation involves fundamentally rebalancing public resource allocation. China’s decades-long “catch-up” spending model has prioritized investment, infrastructure, and industrial capacity—delivering impressive gains but constraining household consumption as a share of GDP. Lu Feng advocates redirecting substantial public resources toward livelihood enhancement and consumption support, while maintaining essential investments in advanced manufacturing and technology. Yin believes this requires reforming local government performance metrics, shifting focus from narrow project attraction to balanced outcomes that prioritize public service delivery, citizen welfare, and supply–demand equilibrium. Liu emphasizes that to finance a turn toward a service- and livelihood-oriented state, fiscal expenditure structure must adjust—moving moderately from an investment-heavy government to a service- and people-centered government—so that expanded coverage and generosity of social programs have stable funding.

Public Service Equalization as the Cornerstone

Equalizing public services emerges as the linchpin of this strategy. Lu believes expanding access to quality education, healthcare, elderly care, housing security, and social insurance—particularly for migrant workers and new urban residents—can simultaneously unlock service consumption and enhance social mobility. Practical measures include increased central government co-financing for nationally significant public services, targeted improvements to basic pensions, and portable benefit packages that follow citizens across regions. Liu’s perspective reinforces this: stronger social security coverage and pooling capacity are essential to boost consumption confidence and release pent-up demand in services. Making essential services universally accessible and predictable reduces households’ need for precautionary savings, freeing resources for discretionary spending.

PS: Other than those three, Liu Shijin, former Deputy Director of the Development Research Center of the State Council, recently also called for considering transferring a large scale of state-owned financial capital to urban-rural resident basic pension insurance. He proposes that the 15th Five-Year Plan should increase rural residents' pensions in two phases: the first phase would raise them to 620 yuan within three years, and the second phase would increase them to 1,000 yuan within two years. He estimates this would generate 8.3 trillion yuan in new demand, boosting China's GDP growth by 0.3-0.5 percentage points. This would also help stabilize China's capital markets and narrow the urban-rural pension gap from 15:1 to 3.5:1, promoting social equity.

Fiscal and Tax Reform as the Foundation

Fiscal and tax reform are the foundation of a more effective government. Yin calls for modernizing the central–local fiscal framework: expanding central responsibility for services with national spillovers, improving transfer payment equity and efficiency, and broadening stable local tax bases. Tax reforms should align incentives, reduce distortions, and support service sector development. Property-related reforms, implemented prudently, can sustain local finances and stabilize the housing market, mitigating real estate adjustment impacts without reverting to debt-driven investment cycles. Fiscal arrangements must also ensure predictable funding for county-level service upgrades and the systematic integration of migrant residents as full hukou holders.

Liu Yuanchun puts special weight on governance reform to make this possible: shift the government’s “objective function” from a growth model centered on industrialization/urbanization/internationalization to one aligned with Chinese-style modernization and fine-grained management. Concretely, reorient local governments from prioritizing mid- and low-end manufacturing toward productive services and livelihood consumption; and synchronize this with tax-system changes that move from production-stage turnover taxes toward a “consumption performance–oriented” tax structure, including back-shifting the consumption tax collection point and related devolution.

(My take: Under the current tax system, local governments' fiscal revenues still primarily come from the production side, which incentivizes them to favor investment over consumption promotion. Therefore, the fundamentals of fiscal and tax reform lie in implementing the Third Plenum target to "shift the collection point of consumption tax downstream and steadily devolve it to local governments," thereby increasing local governments' fiscal revenue from the consumption side. Only when this is complemented by incorporating local consumption metrics into local government performance evaluations can this transformation be truly realized.)

Urban-Rural Institutional Integration

Deepening household registration (hukou) reform to dismantle the dual-track system, combined with calibrated reforms to rural land, homestead rights, and property regimes, can increase rural property income, facilitate new citizens’ urban integration, and expand the consumer base in county and lower-tier markets. The goal is to enhance factor mobility and enable more residents to consume where they live and work, accelerating the formation of a unified national market. Liu Yuanchun stresses that the “15th Five-Year” must deliver a breakthrough in narrowing urban–rural gaps in social security and public services—both to complete the citizenization of roughly 300 million migrant workers (the gap between resident urbanization near 70% and hukou urbanization below 50%) and to provide a pathway for resolving real estate imbalances via high-quality, people-centered urbanization.

Services as the Primary Gap

All three economists identify services as the principal demand-side weakness. While “two new” policies have boosted goods consumption, China lags advanced economies in both the share and sophistication of service consumption. Policy should expand high-quality, affordable service supply by reducing entry barriers, encouraging responsible private and social capital participation, and aligning pricing, reimbursement, and payment systems—particularly in healthcare, elderly care, childcare, education, culture, tourism, and household services. Combined with unified market rules and selective high-standard opening, this approach shifts growth drivers from volatile external demand toward a resilient domestic cycle. Liu further argues that to curb “involution” dynamics in emerging industries, China should modernize governance to balance industrial and competition policies, standardize subsidies, and allow scale- and innovation-based competition—so that services and advanced manufacturing mutually reinforce sustainable demand rather than fuel zero-sum races.

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Lu Feng:

Lu Feng: Raise the consumption rate by 5–10 percentage points during the 15th Five-Year Plan

Yin Yanlin:

Difficulties and Breakthroughs

Liu Yuanchun:

Three Core Themes Must Be Grasped During the 15th Five-Year Plan

Bai Chong-En:

How Should China Drive Forward During This Critical Period of Economic Structural Optimization?

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