Building Consensus, Decoding China's Development New Blueprint | SFC Markets and Finance

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(By Li Yiong, Yang Yulai, SFC, 21st Century Business Herald)

The year 2025 marks the final year of China's 14th Five-Year Plan. Over the past year, policies have continued to take effect, innovation has accelerated across industries, market activity has picked up, and confidence is gradually returning. Despite global uncertainties, international institutions continue to show trust in Chinese assets. A growing consensus around technological innovation, patient capital, and stronger industry-finance collaboration is becoming an important force driving economic growth.

Against this backdrop, the Southern Forum of Finance and Economics 2025 opened on December 5 in Guangzhou. Under the theme "The Power of Consensus: Innovation Surge and the Revaluation of Chinese Assets", the forum brings together experts, scholars, regulators, business leaders, and global financial institutions to share insights on key economic trends.

As China is poised to enter the next Five-Year Plan, we've invited several economists joining us here today to look back at the major developments of 2025 and share their outlook on where China's economy is heading in the next five years.

Tian Xuan, Dean of the National Institute of Financial Research, Tsinghua University

Recommendations for the 15th Five-Year Plan has Three Key Focuses

Tian Xuan: Our sustainable development and the high-quality growth of our economy all fundamentally rely on technological innovation to break through the various institutional and technological constraints we currently face. An essential aspect of technological innovation is, of course, its deep integration with industrial innovation, so that scientific and technological achievements can be effectively translated and turned into real productive forces to improve the quality of our economic growth and enhance the living standards of our people.

I believe that in the future, the financial system - which used to rely more heavily on indirect financing - will need to vigorously expand direct financing, including building a multi-tiered capital market system and developing a wide range of financial instruments, products, capabilities, tools, and mechanisms to fully support our technological innovation and the development of the real economy.

Third, I also noticed that the Recommendations for the 15th Five-Year Plan comprehensively emphasizes the need to balance growth and security. For instance, when we vigorously advance technological innovation, our technological breakthroughs are closely tied to the security of our industrial chains and our economy. Similarly, when we strive to preserve our lucid waters and lush mountains, develop our green economy, and promote green transformation and upgrading, these efforts are directly linked to energy security and ecological security. Therefore, in the Recommendations for the 15th Five-Year Plan, the third point I pay attention to is the need to balance development and security in a comprehensive and multi-dimensional way, taking into account all aspects of national security.

Mutual Empowerment Between Finance and Technology

Tian Xuan: Over the past few months, nine out of the top ten U.S. companies by market capitalization have been technology and innovation-driven enterprises. The U.S. capital market has witnessed this prolonged boom, with the stock market on a consistent upward trend - a momentum essentially driven by technology enterprises and technological innovation.

In China, only two of the top ten are tech companies; the rest are mainly banks, Kweichow Moutai, resources, consumption and financial institutions.This clearly indicates that there is still significant room for improvement and a long way to go for China's finance sector to support the real economy. This is why I believe finance and technology engage in two-way interaction and mutual empowerment. Naturally, finance should support the real economy and technological innovation. However, when technological innovation truly thrives, it will in turn feed back into the development of the capital market and drive financial innovation - including enhancing the efficiency of financial institutions, optimizing the design of financial products, and advancing the innovation of financial tools. In essence, finance and technology are two entities engaged in two-way collaboration, promoting and interacting with each other.

Robin Xing, Chief China Economist of Morgan Stanley

Three "Vitalizations" of China's Economy

Robin: I think China's economy and market in 2025 can be summed up by three instances of "vitality" - a reflection of market confidence having climbed to a significant new level. Specifically, these are: flexible policies, dynamic enterprises, and active capital.

For example, a series of measures - including expanding the fiscal deficit to support consumption, social security, and people's livelihoods - have been rolled out. These efforts have given entrepreneurs and investors in the new era a clearer understanding of the balance between security and development, effectively reassuring them. This is what we mean by policy flexibility.

Second, enterprises have come alive. Since the end of last year to this year, perhaps the most encouraging thing is a steady stream of positive news about our tech sector becoming more self-reliant.

Finally, driven by dynamic policies and enterprises, capital has become increasingly active. This is evident both in the renewed interest in China among global macro asset investors and in domestic capital - which, over the past two to three years, has been locked up in relatively conservative investments such as time deposits and bonds - as their enthusiasm for diversified investments, represented by the equity market, is also on the rise.

The Recommendations for the 15th Five-Year Plan takes science and technology as its guiding principle, yet I am particularly pleased to see that it also takes into account people's livelihoods and consumption, putting forward the goal of increasing the household consumption rate. If this goal is achieved through consolidating the social security system and stabilizing the real estate market (halting its decline and fostering steady development), domestic demand will grow stronger and enterprises' profit margins will improve. In turn, enterprises will certainly be more motivated to invest in R&D. This embodies the concept of an innovation-friendly ecosystem. I believe this is where the 15th Five-Year Plan Recommendations is more balanced and sophisticated compared with the 13th and 14th Five-Year Plans.

Rising Global Interest in China's Stable Assets

Robin: As I mentioned at the outset, there are three key manifestations of "vitality" - and the third, "vital capital flows," also reflects a shift among global macro asset investors. At a time when the world's largest economy, the United States, is grappling with considerable uncertainties and volatility, the era over the past decade or so when dollar assets stood unrivaled has gradually come to an end. Amid this transition, investors are growing more willing to diversify their global portfolios, with rising interest in China's relatively stable assets.

Zhao Wei, Chief China Economist of Shenwan Hongyuan Securities

Focus on "Consolidate Foundations and Accelerate All-Round Efforts"

Zhao Wei: The Recommendations for the 15th Five-Year Plan puts forward an eight-character guideline: "Consolidate Foundations and Accelerate All-Round Efforts". I understand "Consolidate Foundations" as solidifying the strong groundwork laid since the 14th Five-Year Plan period, spanning industrial structure and various other fields.

"Accelerate All-Round Efforts", in my view, indicates that policy advancement will speed up during the 15th Five-Year Plan, both in terms of development and reform. On the reform front, we will continue to advance in depth the over 300 reform tasks outlined at the Third Plenary Session of the 20th Central Committee, unlocking more reform dividends in the process. On the development front, acceleration will cover two dimensions: economic growth and structural reform. The transformation will continue to progress across all sectors around building a modern industrial system.

China's Economy May Have "Atypical Recovery" in 2026

Zhao Wei: In 2026, there are some key points worth focusing on in China's economic operation. First, we should attach importance to the dividends released amid accelerated reform and development. Second, the impact of a series of policies launched after late September 2024 will manifest with a lag for the economy. As domestic demand expansion policies intensify and measures to eliminate "rat race" competition advance in depth, the further manifestation of economic policy effects in 2026 will drive the continued recovery of nominal GDP and corporate profitability. Many industries will benefit from this logic, which I call an "atypical recovery". Unlike traditional cyclical recovery, which is dominated by volume growth supplemented by price increases, this round will see relatively moderate fluctuations in volume; however, price recovery will drive profit improvement in many areas and restore economic vitality.

Another key point is that significant structural differentiation will persist between industries and among companies within the same industry, leading to varying degrees of recovery.

Tao Chuan, Chief China Economist of Guolian Minsheng Securities

15th Five-Year Plan: Industry, Technology, and People

Tao Chuan: I believe the Recommendations for the 15th Five-Year Plan can be divided into three key areas: industry, technology, and people's livelihoods and consumption.

First, the industrial sector must tap into industrial momentum. Following the implementation of the "AI +" Action Plan, China's institutional advantages will drive the development of vertical large models and scenario-based application deployment, facilitating the comprehensive shift from old to new growth drivers.

Second, technology is our strength. Objectively speaking, we have nurtured a number of world-leading Chinese technology enterprises this year. However, the key now lies in industrial empowerment - translating original technological achievements into tangible industrial applications. Looking ahead to the industrial sector, the integration of technology and industry, as emphasized in the Recommendations for the 15th Five-Year Plan Proposal, will undoubtedly spawn more new growth engines.

Third, regarding people's livelihoods and consumption, one phrase that left a deep impression on me is "shifting from investment in tangible assets to investment in people". This indicates that we will certainly increase investment, but such investment will be closely linked to people's daily lives. It will focus on consolidating the foundation of the social security system and shifting investment toward areas such as elderly care, childcare, and education-truly prioritizing investment in people.

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