The Investigator | No. 07/2026
What the 300 pages of the reports and the 15th Five-Year Plan (FYP) emanating from meetings of the National People’s Congress (NPC) and Chinese People’s Political Consultative Conference (CPPCC) do not highlight – and sometimes do not say – is often more interesting than the positive messages the meetings aim to promulgate. This piece amplifies the messages of this article, issued on the eve of the ‘Two Sessions’, and is a companion to this piece on the NPC.
The problems
Although now shorter than in the past, the ‘problem page’ of a report is often the most revealing. Xi Jinping, General Secretary of the Chinese Communist Party (CCP), has long talked about the external storms and waves that affect the People’s Republic of China (PRC) internally. Problems, as laid out in the National Development and Research Commission (NDRC) report, centre on weak investment, sluggish growth in consumption, ‘rat race competition’ between commercial enterprises, a slowdown in traditional growth drivers with emerging industries yet to replace them, weak employment and public services, environmental problems, local government debt, and a real estate market yet to pick itself up from the floor.
The ‘metadata’ of the reports not only illuminates the extent of these threats, but also raises others that are equally – or more – serious.
Threats to stability and to the CCP
The CCP’s primary aim is to stay in power: losing it would be existentially and personally dangerous. Remaining in power demands a lack of popular protest, alongside social stability and a measure of legitimacy to underpin the CCP’s monopoly on power. This notion has become commonplace, and for good reason.
Party legitimacy stems primarily from the promise of ever-growing prosperity. ‘Solidly Advancing Common Prosperity for all the People’ forms part of the title of section XII of the 15th FYP. ‘Chinese modernisation is characterised by common prosperity for all’, states the Work Report of Li Qiang, Premier of the PRC. But this is not a recent emphasis: for over a decade, Xi has made much of the concept of ‘common prosperity’. It loomed particularly large in 2021.
Furthermore, poverty and prosperity are as much relative terms as they are absolute. Inequality gaps cannot be allowed to grow too big, as Xi made clear in a speech in January 2021, in which he stated: ‘Realising common prosperity…is a major political issue that bears on our Party’s governance foundation…We cannot permit the wealth gap to become an unbridgeable gulf’.
Regional, urban-rural, and income disparities had to be resolved, as Xi said in a politburo study session in January 2021. Polarisation of the rich and poor and common prosperity were linked to maintaining social harmony and stability, as an October 2021 article in Qiushi, the CCP’s ideological magazine, stressed.
‘Common prosperity for all’ is a difficult target. In 2020, then-premier Li Keqiang revealed that 600 million people lived on less than CN¥1,000 (US$140; £110) per month, insufficient to cover rent in many cities. Since then, Covid-19, economic malaise, and rising unemployment will not have helped. Tackling unemployment is a particular concern for the CCP, given the more than 12 million graduates entering the job market each year – to say nothing of the 300 million rural migrants looking, with increasing difficulty, to earn a living.
Food, energy, and resource security also deeply concern the CCP, as the FYP and NPC reports emphasise. Beyond the immediate worries about local government debt and the real estate market are the problems of demographics, water shortages, and a mismatch of education and skill levels to meet the demands of a high-tech economy.
The reform agenda: What happened?
Dealing with these threats to stability was what lay behind the third plenum reforms of October 2013. A year earlier, Beijing announced a Gini coefficient of 0.474 (a measure of inequality, where 0.4 is considered a warning line). Xi, echoing ex-premier Wen Jiabao in 2007, declared the Chinese economic and social model to be ‘unbalanced, uncoordinated, and unsustainable’, hence the need for 380 reform measures.
Yet, almost 13 years later, progress on the backbone reforms has been glacial. Those include deepening reform of the household registration system and the provision of basic public services at the place of permanent residence (there were promises in 2021 and there are promises now in the 15th FYP); changes to the tax regime (particularly real estate tax) and personal income tax (the section on tax reform in the 15th FYP is thin); and changing the balance of local and central government shares of revenue and responsibilities (local governments receive around 50% of the former, while paying for over 80% of the latter).
‘Reform’ in the 15th FYP centres on the need to establish a unified national market, aimed at breaking down provincial and county barriers to company growth, and helping to deal with ‘involution’ or ‘rat race competition’, as the FYP puts it. Noticeably, it is the only reform objective that makes it into the ‘Overall Requirements, Main Objectives, and Policy Orientations for Economic and Social Development in 2026’. Breaking down internal market barriers has been a theme for over 40 years, indicating the difficulties of implementation and the need for a realignment of officials’ incentives.
The unacceptability of the 2013 reform programme
Although Xi was General Secretary at the time, in 2013 he had yet to consolidate his power. In essence, the 2013 reforms contradicted his vision of how to achieve his goal of the ‘great rejuvenation of the Chinese nation’.
He required the economic and political system to devote itself to the struggle with the United States (US). This meant the CCP retaining control so that resources could be devoted to maintaining and modernising industrial production, winning the science and technology struggle, and avoiding dependencies on free and open nations while creating dependencies on the PRC. These priorities are explicit in recent Five-Year Plans.
Moreover, the path to economic prosperity – rebalancing the economic model from reliance on investment and exports to consumption – would mean empowering the private sector and giving choices to the people. Not only would this be deleterious to the pursuit of the CCP’s geopolitical aims, but economic power tends also to lead to demands for political representation and power – ‘no taxation without representation’. That might become an existential threat to the CCP’s monopoly on power. Political reform cannot be on the agenda.
While the ‘Two Sessions’ talked of devoting more resources to raising consumption, by using greater welfare spending to rein in the propensity of the Chinese people to save for rainy days, the actions proposed hardly match the rhetoric. The basic pension, already very low, particularly in rural areas – around CN¥200 (US$29; £22) monthly for farmers – was increased by 2%; under half the projected Gross Domestic Product (GDP) growth. A raise of CN¥20 (c. US$3; £2) per month for minimum old-age benefits for rural and non-working urban residents will shift no dials.
According to the Ministry of Finance report, ‘Basic medical insurance subsidies for rural and non-working urban residents and basic public health service subsidies were raised to CN¥700 [US$102; £76] and CN¥99 [US$14; £11] per person per year, respectively’.
Many fewer households than in the past receive the CCP’s minimum living standard guarantee (dibao). At CN¥400 (US$58; £44) – although the sum varies by area – it is well below Li Keqiang’s CN¥1,000 poverty line. Prioritising social security expenditure would move resources away from the priority areas outlined in the FYP, which are crucial to Xi’s vision of the great rejuvenation of the Chinese nation.
Making the PRC’s rise sustainable
Xi’s answer to staying in power and to resolving the ‘unbalanced, uncoordinated, and unsustainable’ economic and social model is fourfold:
‘Security is a prerequisite for development, and development provides a guarantee for security’: They are ‘two wings of one body’. Security covers 20 areas, but the main ones are political security (the CCP staying in power), food, energy, and resources. These feature heavily in the reports and the FYP. It is worth noting the renewed emphasis in the FYP on civil-military fusion; a policy aimed at the sharing of developments in both spheres.
Domination of the sciences and technologies, and of the industries dependent on them: This will reinforce ‘self-reliance’, not only avoiding dependencies on the US and its allies, but also creating dependencies on the PRC by others, which, as in the case of rare earths, has been shown to be an effective method for fighting back against unwelcome foreign measures. Central budget spending on science and technology is set to rise by 10%. Programmes to attract talent are an integral part of the policy.
Increased social controls: Building technological totalitarianism progresses. ‘Improving the social governance system’ – a euphemism for control and maintaining the CCP’s power – mandates ‘improv[ing] the grassroots governance platform based on grid management, refined services, and information technology support’; building up the CCP’s presence in ‘emerging areas’; and maintaining social safety and stability.
Mobilising culture and ideology in support of the CCP: For the Party, culture is first and foremost about ideology. This is evident in part X of the FYP, where the first chapter is about CCP ‘ideals and beliefs’, and where, behind all sections, the assumption is that the Party will lead. If the going gets tough, ideology and patriotism are there to help.
Conclusions
In the ‘Two Sessions’ and the FYP, Xi is promising the PRC and the world more of the same. The political, economic, and social model will not change substantially. Instead, Xi will tighten existing systems, seek more efficient implementation, and appeal to ‘Party spirit’.
Above all, his gamble is that by modernising traditional industries and dominating new technologies and industries, he can cut the Gordian Knot, which the failure to implement the reforms of the 2013 third plenum has left intact. Internally, if the gamble pays off, the troika of ‘unbalanced, uncoordinated, and unsustainable’ will lose the negative prefixes.
Externally, this industrial modernisation and mastery of science and technology will reduce dependencies on the US and its allies, while increasing theirs on the PRC. For Xi, this is a win-win.
There will be no let-up in the pressure imposed on Europe and developing countries by Chinese exports. The conflict between good relations with the PRC, particularly in trade and investment, and security will sharpen. Governments that view their countries’ growth and investment as dependent on the PRC – the United Kingdom is an egregious example – will be disappointed.
Decoupling is a CCP concept and aim – policies such as ‘Made in China 2025’, self-reliance, dual circulation, and the creation of dependencies should have made it clear that hopes of growth by alignment with Beijing will wither on the vine. Read the FYP and the ‘Two Sessions’ reports: foreign countries have been warned.
Charles Parton OBE is Chief Adviser to the China Observatory at the Council on Geostrategy.
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