China's top financial mission is funding sovereign tech independence
Our briefing on developments in China’s macro and monetary discussion.
In this briefing for Friday, 21 November, 2025:
The top mission for finance during the 15th Five Year Plan will be funding Chinese tech innovation, opines Guo Tianyong (郭田勇), chair of the China Banking Sector Research Institute, at the Central University of Finance and Economics in Beijing.
Gold’s displacement of the greenback heralds the beginning of Bretton Woods 3.0, says Zhang Ming (张明), deputy chair of the Chinese Academy of Social Sciences, deputy chair of the National Institution for Finance & Development.
China’s ailing credit growth is a long-term trend, but M2-M1 gap gives hope, according to Wen Bin (温彬), chief economist at China Minsheng Bank.
China should increase the manufacturing sector’s share of its economy, argues Zhang Yu (张瑜), researcher from the International Monetary Research Institute of Renmin University.
The key to boosting Chinese consumption lies in tax reforms, writes Luo Zhiheng (罗志恒), director of the China Chief Economists Forum.
The top mission for finance during the 15th Five Year Plan will be funding China’s tech innovation.
Thus opines Guo Tianyong (郭田勇), chair of the China Banking Sector Research Institute, at the Central University of Finance and Economics in Beijing.
“During the 15th Five Year Plan, the financial sector will bear the critical mission of accelerating the establishment of a great financial superpower,” Guo writes in his recent opinion piece, “Considerations on the Financial Agenda for the 15th Five Year Plan” (郭田勇：“十五五”金融规划的思考).
To this end, Guo sees China continuing to focus on the “Five Great Chapters” (五篇大文章) of its financial policy blueprint, which include:
Science and tech financing.
Green financing.
Inclusive financing.
Aged care financing.
Digital financing.
Guo believes that out of the “Five Great Chapters,” financing of China’s tech undertakings will assume prominence of place, amidst China’s efforts to achieve “independence and self-strengthening” in scientific and technological terms.
“Financing of science and technology ranks first out of the Five Great Chapters,” Guo writes.
“It plays a leading role in supporting innovation-driven development.
“During the 15th Five-Year Plan, continued efforts should be made to increase financial investment in science and technology innovation and improve the entire chain of financial support from basic research to commercialisation.”
In 2024, the Chinese central bank lead the release of the “Work Plan on Firmly and Effectively Undertaking the Great Chapter of Science and Technology Financing” (关于扎实做好科技金融大文章的工作方案).
In terms of monetary policy, the Chinese central bank has since raised the quota for its re-loans to support scientific and technological innovation, as well as pushed for commercial banks to increase lending to tech SMEs.
On the bond market, China has also seen the launch of a “science and technology” board to expedite debt financing by tech companies, as well as launched related risk mitigation tools to make banks more willing to lend.
Nearly 300 companies have since issued around 600 billion yuan in science and tech innovation bonds (科技创新债券).
Gold’s displacement of the greenback heralds start of Bretton Woods 3.0
Zhang Ming (张明), deputy chair of the Chinese Academy of Social Sciences, deputy chair of the National Institution for Finance & Development, believes that the rising share of gold in the reserves of the world’s central banks heralds profound changes to the international monetary system.
He points out that since the second half of 2025, gold has exceeded US Treasuries as a share of global reserves for the first time in nearly two decades.
While gold’s share was higher prior to 1996, during the period from 1996 until the first half of 2025, US treasuries trumped bullion.
In 2016, US treasuries reached a peak of one third of global reserves, from a low of 10% in 1980.
By mid-2025 they had fallen to 25%, while gold’s had climbed beyond the quarter threshold, after languishing at around 10% from 2008 to 2016.
In his essay “A Portent of Changes to the International Monetary System” (国际货币体系变化的先兆?), Zhang argues that this development presages a shift to a multi-polar global currency system.
“Given that the evolution of the international monetary system is a slow and gradual process, the US dollar will remain the most important international reserve currency for some time to come, despite a potential decline in its international status,” Zhang writes.
“However, other international currencies such as the euro, renminbi, yen, and pound sterling will play increasingly important roles, with the renminbi undoubtedly possessing the greatest potential.
“Furthermore, gold, and even commodities like crude oil and non-ferrous metals, will also occupy a place in international reserves.”
Zhang predict that the future international monetary system is “increasingly likely to become a hybrid of Robert Mundell’s three islands of global financial stability and Zoltan Pozsar’s “Bretton Woods 3.0.”
China’s ailing credit growth is a long-term trend, but M2-M1 gap give hope
Wen Bin (温彬), chief economist at China Minsheng Bank, says that lacklustre credit figures are a cause for concern when it comes to domestic demand from Chinese households and enterprises.
“Reduced loan demand and slower credit growth are long-term trends, given a shifting economic and financial structure and large credit base,” Wen writes in his recent opinion piece "How to View the October Financial Data” (温彬：如何看待10月金融数据)
“Relative to interest rates, loan rates have been running at low levels for a considerable period, indicating that the overall supply of credit resources is ample, and the financing needs of the real economy have been met to a high degree.”
Renminbi loans increased by 220 billion yuan in October - 280 billion yuan less than the same period last year, indicating a continued decline in credit growth.
The credit growth rate for October was 6.5%, 0.1 percentage points slower than the previous month.
From January to October, renminbi loans increased by 14.97 trillion yuan, a decrease of 1.55 trillion yuan compared to the same period last year.
New social financing in October reached 815 billion yuan, for a growth rate of 8.5%, down 0.2 percentage points month-on-month but 0.7 percentage points higher than the same period last year.
Wen further points that household loan growth is still ailing, despite Beijing’s much-vaunted campaign to step up domestic consumption, via improved financial access and improvements to the social safety net.
Household loans decreased by 360.4 billion yuan in October, a decline of 520.4 billion yuan compared to the same period last year.
Short-term household loans decreased by 286.6 billion yuan - for a decline of 335.6 billion yuan; while medium- and long-term household loans decreased by 70 billion yuan, 180 billion yuan less than the print for the same period last year.
“This indicates that overall household credit has yet to be stabilized,” Wen writes.
Wen does highlight some cause for optimism in the October data - in particular structural changes that show the Chinese central bank’s push to raise lending to private businesses and the manufacturing sector is proving effective.
At the end of October, the outstanding balance of inclusive micro and small enterprise loans was 35.77 trillion yuan - for a year-on-year increase of 11.6%.
The outstanding balance of medium- and long-term loans to the manufacturing sector was 14.97 trillion yuan, for a year-on-year increase of 7.9%.
“Both of these loan growth rates were higher than the overall loan growth rate during the same period,” Wen writes.
Wen further points out that the gap between China’s M2-M1 money supply has widened - a development generally considered to be positive for domestic demand, as it shows a rising share of demand deposits.
“The M2-M1 gap expanded to 2% month-on-month, but remained at the second lowest point since April 2021.
“The trend of funds being converted into demand deposits continued, reflecting positive signals such as increased activity in corporate production and operations, and a gradual recovery in personal investment and consumption demand.”
China should increase the manufacturing sector’s share of the Chinese economy
Beijing has indicated that the 15th Five Year Plan (2026 - 2030) will see China “maintain manufacturing as a rational share” of the national economy.
In 2024, China’s manufacturing sector comprised 24.9% of GDP, begging the question of whether Beijing should view this as a “rational share” moving forward.
Zhang Yu (张瑜), researcher from the International Monetary Research Institute of Renmin University, argues that determining the rational size of the manufacturing sector should use a new metric that takes into account its size relative to both GDP as well as global manufacturing.
In the opinion piece “A Brief Reflection on the Rational Ratio for the Manufacturing Sector” (浅思“制造业合理比重”) she advocates using a ratio that consists of the following:
The manufacturing’s share of national economic output x manufacturing’s share of the global economy/ the national share of the global economy.
Zhang argues that based on this metric, China still has room to raise the scale of the manufacturing sector, given an ongoing decline in manufacturing as a share of the global economy.
Manufacturing as a share of global economic output has steadily declined for more than half a century, from 25% in 1970 to 15.1% in 2024.
Zhang concludes that even if China has a disproportionate share of global manufacturing, this does not translate into a disproportionate share of global GDP.
The Renmin University economist further argues China’s share of global manufacturing is not conspicuously high by recent historical standards set by the world’s other major economies.
“In 2024, China’s share of the global manufacturing sector was 27.7%,” she writes.
“Since 1970, the US was above 27% from 1981 to 1985 as a share of global manufacturing, and Japan was over 20% from 1993 - 1995.
“This it to say that [China’s] share may still have room for increase.”
The key to boosting Chinese consumption lies in tax reforms.
Thus argues Luo Zhiheng (罗志恒), director of the China Chief Economists Forum.
This is because tax reforms can achieve pivotal shifts to wealth distribution, as well as raise the revenues needed for improvements to the social safety net, both of which will dim the urgent need felt by Chinese citizens to be thrifty and frugal.
Given Beijing’s current preoccupation with boosting domestic demand via gains to consumption, Luo anticipates tax reforms to be a major theme during the upcoming 15th Five Year Plan (2026 - 2030).
“Taxation, based on the political power of the state, influences the distribution of national income, and raises revenue to ensure people’s needs for public services such as healthcare, education, and aged care,” Luo writes in the opinion piece “Taxation Energises the 15th Five Year Plan - Six Thoughts and Recommendations on Better Employing the Role of Taxation” (“罗志恒：税收赋能“十五五”——更好发挥税收职能的六点思考与建议”)
“In the past, continuously optimized tax systems and tax and fee reduction policies have reduced business operating costs, promoted technological innovation, and boosted consumption, playing a vital role in high-quality development.
“In the future, tax system reform and policy optimization will play an even more active role.”
Luo highlights the 15th Five-Year Plan’s heavy preoccupation with consumption.
“[It] will focus more on expanding domestic demand and invigorating consumption.
“The Recommendations [on the 15th Five Year Plan] firstly make a clear call for markedly increasing the household consumption ratio, a mission which requires the creation of a ‘great domestic market.’
“Great domestic demand can both absorb industrial capacity, drive a smooth shift from old to new drivers, as well as gradually reduce dependence on external demand and further strengthen economic resilience.”