Economists warn that continued high-tech subsidies may distort markets and delay rebalancing toward more sustainable, domestic-demand-driven growth, and could worsen overcapacity.

The National People’s Congress in Beijing will set the 2026–2030 policy blueprint and annual growth targets, signaling a trade-off between ambitious industrial/tech development and boosting domestic demand.

China’s economy faces a slowdown driven by a housing downturn, struggling SMEs, and high youth unemployment, challenging the goal of a high-tech, AI-driven modern economy.

China remains export-dependent, posting a roughly $1.2 trillion trade surplus in 2025 amid global headwinds and rising calls from partners to reduce state subsidies that may fuel overcapacity.

Analysts note tension between Xi Jinping’s tech- and export-led ambitions and the push to boost domestic consumption, requiring a delicate policy balance.

The government continues to subsidize high-tech sectors such as AI, robotics, EVs, chips, and renewables to drive high-quality development, but this risks overcapacity and slowing reallocation from traditional jobs.

The NPC remains largely ceremonial, as party leadership consolidates control; recent military leadership purges aim to secure Xi’s long-term vision of strategic independence and global influence.

Youth unemployment is high, with about 12.7 million graduates entering the job market and unemployment among young people over 16%, prompting concern and calls for social welfare measures.

Experts expect the congress to consider social welfare and reforms to cushion slower growth and support domestic demand, aligning with a shift toward more sustainable development.

The five-year plan for 2026–2030 will emphasize high-quality development, social welfare, and stabilizing growth while addressing overcapacity and sustaining momentum.

Housing market weakness and developer defaults are weighing on employment and consumer confidence, as graduates face a tough job market and slower consumption.