China committed on Thursday to invest in high-tech industries and scientific innovation, considering these sectors essential to strengthen the country’s security and autonomy amid increasing geopolitical tensions and intense rivalry with the United States.
At the opening of the annual session of the Chinese Parliament, Premier Li Qiang praised China’s ability to withstand the tariff increases imposed by President Donald Trump.
Li Qiang announced increases of 7% in the defense budget as well as in research and development.
Beijing set its growth target for 2026 between 4.5% and 5%, a slightly slower pace than the 5% achieved last year.
The new five-year plan of China includes expected investments in innovation and industrial modernization, as well as a “notable” – but unspecified – increase in household consumption as a share of economic output.
These commitments show that Beijing is concerned that weak domestic demand makes the second largest economy too export-dependent for its growth.
They also highlight that China does not want to abandon its efforts to modernize its vast industrial complex, which allows it to influence supply chains, in a context of increased commercial competition.
“The imbalance between strong supply and weak demand is glaring, market expectations are low, and there are many hidden risks and dangers in key areas,” said Li Qiang.
Economists believe that a less ambitious growth target gives Beijing more flexibility to implement reforms, such as reducing industrial overcapacity, but warned that this change does not mean abandoning its production-centric growth model.
The five-year plan aims to increase the value added of “key industries in the digital economy” to 12.5% of gross domestic product (GDP). The government will also implement policies to create a nationally integrated data market and establish a system for preventing risks related to the security of artificial intelligence (AI).
The commitment to increase spending on research and development represents a 40% increase over the duration of the five-year plan. This funding mandate aims to develop what President Xi Jinping called “new productive forces” in areas such as AI and semiconductors, and protect China from American export controls.
China has committed to support “revolutionary” developments in a range of industries, from biomedicine to semiconductors.
In terms of stimulus, China plans for a budget deficit of 4.0% of GDP, similar to that of the previous year.
It has set unchanged special debt issuance quotas for the central government at 1.3 trillion yuan (161.87 billion euros) and for local governments at 4.4 trillion yuan.
(Reporting by Beijing, written by Marius Zaharia; French version Camille Raynaud)
