China's New Cold War Blueprint

The 15th Five Year Plan (2026 - 2030) readies China for the extension of economic hostilities.

Nearly half-a-century ago, the Communist Party first embarked upon the task of dismantling the Soviet-style economic system that dominated Chinese society during the days of Mao Zedong.

While China’s economy has since been completely transformed by over forty years of market-based reforms, the nation continues to retain many of the institutions and trappings of its Marxist-Leninist origins.

Perhaps most prominent amongst them are the plenary sessions of the Communist Party’s Central Committee. These are meetings attended by all members of the party’s highest working organ roughly once a year, serving as landmark events for the unveiling of key policy initiatives.

Another signature holdover from China’s command economy past is the system of five-year plans for economic and social development.

The plans are one of the most distinctive features of the Soviet system that inspired China’s early communist leadership, having first been pioneered by Joseph Stalin at the end of the 1920s as authoritative policy blueprints.

China just witnessed the confluence of these two stalwart Soviet traditions, with the Communist Party holding the 4th Plenum of its 20th Central Committee from 20 - 23 October, using it as the stage for unveiling key details on the 15th Five Year Plan (2026 - 2030).

Preparation of China’s 15th Five Year Plan coincides with another throwback from Soviet history - the intensification of Cold War-style animosity between the world’s two last thermonuclear superpowers.

The communique from the 4th Plenum - and in particular details from the Plenum’s “Recommendations on the Drafting of the 15th Five Year Plan” (中共中央关于制定国民经济和社会发展第十五个五年规划的建议), makes it readily apparent that Beijing expect such Cold War tensions to persist, if not worsen, through to the end of the 2020s and beyond.

It’s highly likely that Xi and his colleagues concur with the views of renowned international relations scholar Jin Canrong (金灿荣). Jin holds that hostility emanating from Washington is set to further intensify, as China moves closer to achieving parity with - and potential ascendance over - the United States economically.

Consequently, China will use the next five-year plan - an institution from its Soviet past - to deal with the Cold War challenges of the present and future. The plan will act as a strategic apparatus for coordinating a complex array of policy measures, with the goal of preventing economic hostilities from derailing China’s current growth trajectory.

The core strategic theme is to shore up China’s economic and technological independence, thus achieving a corresponding reduction in its reliance upon the US and its allies for critical technologies and export demand.

Chief amongst the themes of the 15th Five Year Plan are:

• Rivalling, if not surpassing, the US in scientific and technological prowess, and shoring up the security of China’s industrial supply chains. The goal is to reduce China’s dependence upon imported technology - most critically the silicon semiconductors that Washington has used as a potent bargaining chip.

• Further opening of China’s economy and closer trade ties with other emerging economies. This will provide China with an alternative source of export demand, compensating for any further roadblocks to exports arising from US-led protectionism. The possibility of internationalising the renminbi has also been mooted, to protect China from the threat of financial sanctions.

• Boosting domestic demand - with an especial focus on household consumption. Beijing considers that the surest means of safeguarding aggregate demand to be cultivating it internally. A key focus moving ahead will be on boosting consumption via adjustments to income distribution and improvements to the social safety net.

Achieving scientific sovereignty

At the forefront of Beijing’s current concerns is the vulnerability of its industrial supply chains to the use of sanctions on key technologies by Washington and its allies. This vulnerability was most recently exemplified by the Dutch government’s decision to seize control of Chinese-owned chipmaker Nexperia.

Beijing hopes to cure itself of this vulnerability permanently, via policies that spur the development of China’s independent scientific capabilities and indigenous innovation.

If China can simply achieve parity with the US in its terms of scientific prowess, then its industrial supply chains will be impervious to attempts to destabilise them via the withholding of essential technologies.

For this reason, one of the Plenum’s “main objectives” for the 15th Five Year Plan is a “large-scale increase in scientific and technological independence and self-strength” (科技自立自强水平大幅提高).

The Plenum refers specifically to “accelerating high-level scientific and technological independence, “strengthening breakthroughs in basic innovation and key core technologies” and “comprehensively strengthening independent innovation capability.”

It issues the mandate for China to “seize the historic opportunities created by the latest round of scientific and technological revolutions and industrial transformations” - in a clear sign that Beijing hopes to leapfrog the US at the cutting edge of innovation.

This will in turn enable China to “seize the commanding heights of scientific and technological development.”

“Scientific and technological competition will be the key to the great game of nations in the future,” said Zhang Yuzhe (张于喆), director of the National Development and Reform Commission’s High-Tech Industry Research Office, to state-owned media.

“Only by increasing investment and achieving technological self-reliance can we realize the dream of becoming a great nation.”

Su Jian (苏剑), director of the National Economic Research Center at Peking University, says Beijing considers it an economic and strategic imperative for China to take the lead in emerging technologies.

“Artificial intelligence, aerospace, and robotics have ushered in a new industrial revolution,” Su said. “Accelerating high-level technological self-reliance is an inevitable decision.”

The “real economy” is what matters for Beijing

A closely related theme is Beijing’s continued focus on the “real economy,” as highlighted by multiple opinion pieces from state-owned media on the significance of the 4th Plenum for the 15th Five-Year Plan.

The “real economy” in this case refers to the manufacture of tangible goods and the development of productive capacity, in contrast to financialisation and the credit-driven growth of asset prices.

Consequently, the Plenum speaks of the need to “firmly put the focus of economic development on the real economy,” as well as “consolidate and strengthen the foundations of the real economy.”

The end goal here is “the establishment of a modernised industrial system, with advanced manufacturing at its core.”

Free trade and renminbi internationalisation

Trump’s Liberation Day tariffs hit China’s economy by creating roadblocks for the export of affected goods to the US - still far and away the world’s largest economic power in nominal terms.

China has long prepared for such disruptions, by expanding trade with ASEAN and Belt and Road Nations, in order to pick up the slack for any declines in exports to the US and its advanced economy peers.

To this end, Beijing has sought to position itself as a reliable trading partner and the stalwart champion of global free trade, in sharp contrast to an increasingly fickle and protectionist Washington.

The 15th Five Year Plan will see China further burnish its credentials as the world’s advocate-in-chief of free trade, as well as improve ties with emerging economies that provide it with alternative export markets and supply chain routes.

The Plenum calls for “expanding high-level external opening and creating new conditions for joint-win cooperation.”

In the breathless parlance of the Plenum’s communique, China will “steadily expand systemic opening, preserve the multi-lateral trading system, expand international circulation and use openness to expedite reform and development, sharing opportunities with all the nations of the world.”

China could also seek to drive greater internationalisation of the renminbi, in a bid to create a reserve currency alternative to the US dollar.

This would shield Beijing from the peril of the financial sanctions applied by Washington against Russia and Iran - a major concern for as august an economic authority as Zhou Xiaochuan (周小川), the former governor of the Chinese central bank.

Sheng Songcheng (盛松成), a former director at the Chinese central bank, has also called for making renminbi internationalisation a greater priority during the 15th Five Year Plan.

In an opinion piece on the 4th Plenum, Sheng advocated further efforts to “transform the renminbi into a safe harbour asset, and drive internationalisation of the renminbi.”

Consumption as key growth driver

The notion that Xi Jinping is firmly opposed to raising domestic consumption for reasons of ideological aversion remains a hardy canard amongst even the most reputable of offshore China-watchers.

Nothing could be further from the truth - at least if China’s own policy agenda or the pabulum of its official documents are to be believed.

Beijing launched a nationwide campaign to subsidise the consumption of durable goods in the first half of 2024 - an initiative it’s since expanded since the start of 2025.

The Central Economic Work Conference held at the end of 2024 also made expanding domestic demand - and spurring household consumption in particular - its top priority for the upcoming year, in anticipation of a protectionist second-term Trump presidency.

It stands to reason that Beijing should turn to consumption as its preferred option for growing macroeconomic demand, given the shadow cast over exports by trade hostilities, as well as China’s own high investment levels that are considered as a source of risk-fraught imbalance.

Consequently, the 15th Five Year Plan reiterates the strong focus upon consumption that was emphasised by the Central Economic Work Conference held last December.

The Plenum calls for “firmly expanding domestic demand,” going so far as to refer to it as a “strategic key point.”

This will involve “vigorously spurring consumption” and “bringing benefit to living standards” - which in essence means giving Chinese consumers greater access to goods and services.

Consensus opinion amongst Chinese economists is that spurring consumption requires improvements to the social safety net and adjustments to wealth distribution. Official boilerplate holds that only then will Chinese citizens “have the desire and courage to consume.”

To this end, the Plenum calls for “expanding the intensity of protections and improvements to living standards,” “improving the income distribution system,” and “improving the health of the social protection system.”

Qi Yunlan (漆云兰) , a market economy researcher with the State Council, said China’s levels of consumption have long lagged behind those of other nations at comparable stages of development.

Over the next five years, Qi expects China to “use policy coordination, institutional optimisation and industrial upgrade to create long-term mechanisms for further raising household income levels, in order to improve consumption capability.”

Qi also forecasts that China will “improve the social security system, raise supply levels and improve the consumption environment, to increase willingness to consume and eventually achieve an invigoration of consumption.”

A closely related theme here will be efforts to further weld the Chinese economy into a single “grand unified national market” - one of the main policy themes for Xi in 2025.

The Plenum calls for the “establishment of a great domestic market” referring to it as the “strategic foundation for Chinese-style modernisation.”

Beijing hope this can boost consumption by enhancing what Chinese policymakers are wont to refer to as “grand internal circulation” - a phrase perhaps drawing inspiration from one of history’s great Sinophiles - the 18th century Physiocratic economist François Quesnay.