investors study Beijing’s 5-year plan for hints on future market forces
Over the past week, investors hoping for an extension of this year’s blistering, tech-led run on Chinese equities have been poring over – and reading between the lines of – a draft of Beijing’s plan for economic and social development in the next five years.
The blueprint emerged from a four-day Communist Party plenum that concluded on October 23, during which party chief Xi Jinping and the all-powerful Central Committee pledged to advance core technologies from semiconductors to artificial intelligence to quantum computing. They also highlighted tech self-reliance, domestic consumption and improving people’s livelihoods as key goals for 2026-2030.
The Communist Party issued a summary of the development goals on the day the plenum ended, and a week later released the detailed proposal. While the five-year plan will not be finalised until the legislative National People’s Congress in March, the initial details are enough to reshape the investment landscape and help traders identify key medium-term opportunities.
Do you have questions about the biggest topics and trends from around the world? Get the answers with SCMP Knowledge, our new platform of curated content with explainers, FAQs, analyses and infographics brought to you by our award-winning team.
“The five-year plan is expected to reset investment themes and the valuation system on the capital market,” said Wang Jun, a strategist at BOC International in Shanghai. “The new productive force represented by tech self-reliance, the green transition and an upgrade of domestic demand may run through the policy front and investment themes in the next five years. We expect long-term capital such as mutual funds and insurance funds to further tilt towards those industries of strategic value.”
Chinese President Xi Jinping (centre) attends the fourth plenary session of the 20th Communist Party of China Central Committee in Beijing on October 23, 2025. Photo: Xinhua alt=Chinese President Xi Jinping (centre) attends the fourth plenary session of the 20th Communist Party of China Central Committee in Beijing on October 23, 2025. Photo: Xinhua>
Chipmakers, robotics companies, high-end manufacturers and stocks linked to domestic consumption were set to emerge as outperformers in the long run, according to brokerages including Guotai Haitong Securities and Huajin Securities.
In a sign of how critical technology will be for China’s growth in the following five years, the proposal had 46 references to the word, compared with 36 in the plan for 2020-2025.
The five-year plan’s importance for investors grew after this year’s bull run – which drove the Shanghai Composite Index of yuan-denominated stocks to a decade high – showed signs of petering out. A twist and turn in China-US tensions, frothy valuations of tech companies and a weak domestic economy threw the durability of the rally into doubt.
Beijing’s call for more tech breakthroughs and a renewed commitment to self-sufficiency should reignite enthusiasm for Chinese technology firms that have led the rally on the broader market this year, reversing years of declines. The surge in tech stocks stemmed from a re-rating triggered by the abrupt ascent of AI start-up DeepSeek earlier in the year and hopes of high-quality domestic products replacing imported products.
The Star Market 50 index of the biggest stocks on the Shanghai exchange’s tech board, including Semiconductor Manufacturing International Corporation (SMIC) and AI chipmaker Cambricon Technologies, has gained 43 per cent this year. Meanwhile, the Hang Seng Tech Index has risen 32 per cent in the period. Both gauges have beaten the mainland and Hong Kong benchmarks.
Sentiment this year also shifted towards Chinese tech stocks this year because Beijing ended a brutal regulatory crackdown on internet platforms that had sparked a massive exodus starting in 2020. Meanwhile, defying US curbs on exports of most advanced technologies, China is making rapid advances in the areas of robotics, AI infrastructure and large-language models as Beijing presses ahead with the self-reliance strategy.
The stock market reflects the progress. The combined market capitalisation of strategic emerging industries totals 36 trillion yuan (US$5.1 trillion) currently, representing about 40 per cent of the aggregate value of the listed companies on the mainland’s three exchanges, according to Guosen Securities. Most of the companies were engaged in biopharmaceuticals, electronics and computing, it said.
“The bull run on tech stocks is expected to extend to 2026 or even the whole of the following five years,” said Wang Kai, an analyst at the brokerage. “The potential of Chinese tech stocks may lead global markets against the backdrop of innovation.”
Goldman Sachs said in an October 22 report that Chinese stocks could rise about 30 per cent through the end of 2027, with technology innovation sustaining earnings growth.
However, some observers were more cautious.
Charu Chanana, chief investment strategist at Saxo Markets, pointed to high valuations as a hindrance to further gains in Chinese tech stocks.
While the Hang Seng Tech Index was cheaper than the Nasdaq 100 on a price-to-earnings basis, its multiple of 20 times earnings was already close to the five-year average, according to Bloomberg data.
The multiples for some leading companies are even more eye-watering. China’s biggest chipmaker, SMIC, was valued at 199 times estimated earnings for this year, and the ratio for Cambricon, dubbed China’s Nvidia, was 271 times, Bloomberg data showed. In comparison, the so-called Magnificent Seven US stocks, including Nvidia and Apple, currently trade at 38 times.
“In this context, policy optimism may already be priced in, leaving the next phase dependent on earnings delivery, particularly from domestic chipmakers, automation firms and AI infrastructure players capable of turning policy momentum into profits,” Chanana said.
UK-based asset management firm Aberdeen Investments said that it would explore opportunities arising from the green transition in the five-year plan, as it anticipated that China would double down on renewable energy.
“Renewable power investment is increasingly being used as a macro-stabilisation lever, which we estimate largely offset the drag from the real estate bubble being deflated over 2023 and 2024,” said Robert Gilhooly, an economist at Aberdeen. “Given the need to deal with overcapacity, we expect that power capacity, storage facilities and investment to integrate renewables into the grid will be ramped up.”
Tibetan sheep graze at a solar farm in Hainan prefecture of western China’s Qinghai province on July 1, 2025. Photo: AP Photo alt=Tibetan sheep graze at a solar farm in Hainan prefecture of western China’s Qinghai province on July 1, 2025. Photo: AP Photo>
On top of tech innovation and self-reliance, the five-year proposal also emphasises maintaining a “reasonable” share of manufacturing in the economy, a strategy interpreted as entrenching China’s dominant position in the world’s supply chain amid geopolitical uncertainty.
Beijing has recently leveraged exports of rare earths – the critical metals used to make everything from weaponry to hi-tech products – in its trade talks with the US. China controls about 70 per cent of global supply and leads the world in refining and processing.
Unlike the preceding five-year plan through 2025, the new proposal devoted limited sections to the embattled property market and the ongoing anti-involution campaign that aims to eliminate obsolete capacity in some of the green-energy industries.
While this was a disappointment to investors who expected more policy support to alleviate these economic obstructions, Gary Dugan, CEO of The Global CIO Office, viewed the change in rhetoric as a decisive pivot to a new growth model that reduces reliance on real estate and credit.
With China striving to pursue high-quality growth, key investment themes would emanate from deepening supply-side reforms, accelerating innovation in strategic sectors including semiconductors, AI and green energy, and enhancing the role of state-led investment in core infrastructure, he said.
“For markets, this suggests that cyclical reflation trades tied to property or broad-based stimulus will remain challenged, while targeted industrial sectors aligned with the new development plan, such as robotics, EVs and next-generation manufacturing, could continue to be the relative winners,” said Dugan, whose firm advises family offices, wealth managers and ultra-high-net-worth individuals.
An employee works at a semiconductor-chip factory in Huai’an, in eastern China’s Jiangsu province, on April 29, 2024. Photo: AFP alt=An employee works at a semiconductor-chip factory in Huai’an, in eastern China’s Jiangsu province, on April 29, 2024. Photo: AFP>
The shift implied an annual growth rate of between 4.5 and 5 per cent in the next five-year period, compared with the current target of around 5 per cent, according to UBS Group. The Swiss bank added that China would need to strengthen the yuan and increase per capita gross domestic product by a compound annual rate of 6 to 8 per cent to meet its goal of matching developed countries in that metric by 2035.
For those who bet on immediate stimulus measures, the plenum may present a short-term trading opportunity. Top leaders’ call for “resolutely” achieving this year’s economic growth target signalled a rapid ramp-up of policy support to arrest the resuming downturn, according to Nomura Holdings.
China would require 4.2 per cent growth in the fourth quarter to meet its annual goal of around 5 per cent, but intensifying headwinds made reaching the target more challenging, said Lu Ting, chief China economist at the Japanese brokerage.
The third quarter’s 4.8 per cent growth was mainly driven by the rising stock market and exports, which may not be sustainable, Lu said. More worrisome were a deceleration in retail sales, a decline in fixed-asset investment and the unrelenting slump in the property market, he added. Supportive measures put in place earlier, including childbirth subsidies and an increase in bond issuances by local governments, were not adequate to reverse course, he said.
“We reckon that after the plenum, policy focus might be once again shifted to ensuring short-term growth stability and ending deflation,” Lu said. “Fiscal expansion will likely be stepped up, policy rates could be moderately cut and arrears might be further cleared.”
An easing of the China-US confrontation after the meeting between President Xi Jinping and US President Donald Trump this week may only underscore the urgency of tech innovation and self-efficiency for Beijing, as both sides are buying time for a potential decoupling. Washington signed a slew of pacts with Australia and Japan recently on rare earth access, as it aims to wean itself from reliance on China for the metals.
The Xi-Trump sit-down provided “both sides with time to adapt to this evolving dynamic, reduce mutual dependencies and mitigate economic disruption”, said Sophie Altermatt, an economist at Julius Baer, the Switzerland-based financial institution that specialises in private banking and wealth management.
People walk near screens showing stock data in Shanghai on April 14, 2025. Photo: EPA-EFE alt=People walk near screens showing stock data in Shanghai on April 14, 2025. Photo: EPA-EFE>
Historically, China’s stock markets react positively to the release of five-year development plans. The mainland’s yuan-traded stocks rose by an average of 16.5 per cent one year after the plenums, while key industries seen as policy beneficiaries returned 17.5 per cent on average, according to HSBC Qianhai Securities.
The brokerage recommended that investors focus on stocks associated with tech innovation, consumption and the green transition.
The five-year plan would “strengthen the trend of a slow bull market in the longer perspective,” said Deng Lijun, an analyst at Huajin Securities.
“Earnings expectations will continue to improve, and proactive policies will expand stocks’ valuations,” he said. “Risk appetite will get a boost.”
