The Fourth Plenary Session of the 20th Central Committee of the Communist Party of China was a pivotal meeting held at a critical historical juncture, marking the conclusion of China’s 14th Five-Year Plan and the layout phase for the 15th Five-Year Plan. Participants at the session deliberated over and adopted the CPC Central Committee’s Recommendations for the Formulation of the 15th Five-Year Plan for National Economic and Social Development (hereinafter referred to as the "Recommendations"), pointing the direction and drawing a new blueprint for China's economic and social development over the next five years and beyond.

I. Core Thesis: A Robust Domestic Market as the Strategic Support for the New Pattern of Development

Market size is a vital strategic resource for a big power. Cultivating a robust domestic market is a crucial pillar for the new pattern of development and constitutes a key economic advantage for a major nation. In July 2020, the CPC Central Committee proposed moving fast to foster a new pattern of development featuring domestic circulation as the mainstay, with domestic and international circulations reinforcing each other (the "Dual Circulation"). This was a major strategic decision made by the Central Committee with Chinese President Xi Jinping at its core, based on China’s new stage of development, new historical mission, and new environmental conditions. It is also an intrinsic requirement for leveraging China's advantages as a hyper-scale economy and market.

The new pattern of development requires China to more effectively utilize both domestic and international markets and resources. The Plenum’s communiqué explicitly points out that a robust domestic market is the strategic anchor for China’s modernisation and the foundational basis for accelerating the fostering of the new pattern of development. This conclusion profoundly reveals the fundamental and strategic status of the domestic market in China's economic and social development in the new era, elevating its significance to an unprecedented height.

Facing an increasingly complex and challenging external environment, characterised by intensifying trade protectionism and insufficient momentum in global economic growth, China is anchoring its development domestically. By making domestic demand the main engine and stabiliser of economic growth, and by facilitating unimpeded domestic circulation to enhance the economy's endogenous momentum and reliability, China aims to use the stability of domestic circulation to hedge against the uncertainties of the international economy. This is a strategy to seize the initiative in future development and a proactive move to safeguard and prolong the period of development.

Currently, the world is witnessing great changes unseen in a century, with escalating geopolitical risks, as the strategic competition between major powers is becoming increasingly fierce. This poses unprecedented risks and challenges to China's development. Against this backdrop, fostering the “Dual Circulation” is of immense strategic significance.

Strengthening domestic circulation means firmly holding the destiny of development in China’s own hands. A robust domestic market can provide resilience for China’s economic development to effectively hedge against external shocks. Simultaneously, leveraging the advantage of a super-large-scale market allows China to attract high-quality global resources. By using domestic circulation to draw in global production factors and using international circulation to elevate the efficiency and level of domestic circulation, China can shape new competitive advantages through high-standard opening up. This serves not merely as a passive defense against short-term risks, but as a major strategic choice with a long-term vision to proactively shape future development opportunities.

II. Strategic Basis: Integrating the Expansion of Domestic Demand with Deepening Supply-Side Structural Reform

1. The Dialectical Relationship: “New Demand Leads to New Supply, and New Supply Creates New Demand"

“New Demand Leads to New Supply, and New Supply Creates New Demand" represents the latest theoretical summation of supply-demand relations formulated by the Fourth Plenary Session and serves as the guiding principle for economic policy making. This dialectical relationship profoundly reveals the inherent laws of economic development in the new era.

On the one hand, "new demand leads to new supply" emphasises the directing role of the demand side. With rising household incomes and the upgrading of consumption patterns, there is a growing public demand for high-quality goods and services, ranging from healthcare, cultural tourism, elderly care, and childcare, to green, smart, and personalised products. These new demands provide the direction for industrial upgrading and technological innovation on the supply side, compelling enterprises to improve product quality and optimise service experiences, thereby driving the industrial structure towards the medium-to-high end of the value chain.

On the other hand, "new supply creates new demand" highlights the innovation-driven role of the supply side. Through innovation in technology and business models, enterprises can generate entirely new products and services, unlocking unprecedented market opportunities. For instance, the application of emerging technologies such as AI, big data, and the Internet of Things has spawned new business models like smart homes, autonomous driving, and telemedicine, creating new focal points for consumption. Supply-side innovation can stimulate consumer demand and lead consumption trends, thus injecting fresh momentum into economic growth. The two interact to form a virtuous cycle wherein demand pulls supply and supply creates demand, promoting higher-quality, more efficient, and more sustainable economic development.

2. Adhering to the Close Integration of "Improving Living Standards while Increasing Consumer Spending" and “Combining Investment in Physical Assets with Investing in Human Capital"

‍The “Recommendations” propose to "work toward improving living standards while increasing consumer spending and combine investment in physical assets with investment in human capital". This represents a concrete pathway for expanding domestic demand; it embodies a people-centric developmental philosophy and profoundly elucidates the intrinsic connections between living standards, consumption, and investment.

"Improving living standards" serves as the foundation for promoting consumption. Only by continuously deepening the reform of income distribution, raising the incomes of low- and middle-income groups, and refining the social security system can we effectively enhance the public's capacity and willingness to consume, thereby unleashing immense consumption potential. For instance, increasing investment in public services, such as education, healthcare, and elderly care, alleviates the public's concerns regarding the future, thereby making them more willing to consume.

"Investing in physical assets" and "investing in human capital" constitute two critical dimensions of expanding effective investment. "Investing in physical assets" refers to strengthening the construction of both traditional and new infrastructure, including transportation, energy, and water conservancy, as well as 5G, data centres, and the industrial internet. This not only shores up weak links but also directly drives the development of related industries, providing support for economic growth. "Investing in human capital" emphasises the development of human resources, including building high-quality education systems, strengthening vocational skills training, and refining talent incentive mechanisms. This is not only fundamental to enhancing national innovation capacity and industrial competitiveness but also an intrinsic requirement for promoting well-rounded human development and realising common prosperity. Closely integrating the two implies that investment must focus not only on perfecting "hardware" but also on upgrading "software," achieving the synergistic growth of physical and human capital to provide enduring momentum for high-quality development.

3. The Path to Enhance Dynamism and Reliability of Domestic Economy

‍Enhancing the dynamism and reliability of the domestic economy constitutes the core objective of the new pattern of development. A clear pathway for the attainment of this objective has been charted.

First, China must vigorously boost consumer spending and fully leverage the foundational role that consumption plays in economic growth. This requires a multi-pronged approach, including the implementation of initiatives to promote consumption and the expansion of the supply of high-quality consumer goods and services, particularly by unlocking the potential within service sectors such as cultural tourism, wellness, and childcare. Meanwhile, by optimising the consumption environment and strengthening the protection of consumer rights, we can ensure that consumers are able, willing, and confident to spend.

Second, China must leverage the critical role of effective investment in optimising the supply structure. Investment should focus on key domains such as "new infrastructure", "new urbanisation", and major engineering projects such as transportation and hydro systems. This approach addresses the country’s "weak links" while driving current growth and accumulating momentum for long-term development. Furthermore, encouraging and attracting more private capital to participate in the construction of major projects will stimulate the vitality of private investment.

Finally, and most critically, we must build a unified national domestic market that is efficient, well-regulated, fair, competitive and fully open. We can achieve this by breaking down local protectionism and market segmentation, removing barriers to the free flow of factors, and reducing logistics costs across society. A unified national domestic market will maximise the potential of domestic demand and enhance the resilience and vitality of the domestic economy.

III. Four Pillars for Building a Robust Domestic Market: Policy Agenda and Practical Results

1. Vigorously Boosting Consumption: Stimulating Market Vitality and Potential

‍The Fourth Plenary Session anchored the strategic goal to "fundamentally realise socialist modernisation by 2035", reaffirming the ambition that by this date, China’s per capita GDP should reach the level of a mid-level developed country. This is an ambitious long-term vision that underscores the massive potential for future growth within the Chinese market.

Consumption serves as the key driver for stimulating market vitality. In 2024, China's GDP exceeded 130 trillion yuan for the first time, with per capita GDP reaching US$13,445, placing the country at the forefront of upper-middle income economies. However, China’s domestic consumption rate remains relatively low, standing at approximately 56.6%, as compared to the 80% average of developed countries. As such, there remains immense room to further expand China’s domestic consumer spending.

Underpinned by robust policies, China's consumer market is exhibiting a steady recovery and a positive trend towards structural upgrading. Despite facing certain pressures, consumption remains the solid bedrock of economic growth. Data from the National Development and Reform Commission reveals that from 2021 to 2024, the average contribution of domestic demand to economic growth was 86.4%, of which domestic consumption plays the biggest role. In 2024, consumption continued to act as the "primary driver of economic development", contributing 44.5% to economic growth and driving GDP growth up by 2.2% points. Structurally, the trend of consumption upgrade is pronounced, with service consumption and quality-oriented consumption emerging as new growth areas. Data from the National Bureau of Statistics indicates that from January to July 2025, total retail sales of consumer goods reached 28.42 trillion yuan, an increase of 4.8% year-on-year, while service retail sales grew by 5.2% year-on-year. Notably, retail sales in sectors such as travel and tourism, transportation, as well as culture, sports, and leisure all maintained double-digit growth, effectively boosting the vitality of the consumer market.

2. Expanding Effective Investment: Focusing on Key Areas and Stimulating the Vitality of Private Investment

‍Expanding effective investment is a critical measure for stabilising economic growth and optimising the supply structure. The Fourth Plenary Session emphasises the need to expand effective investment and improve long-term mechanisms to facilitate the participation of private enterprises in major projects.

Expanding effective investment empowers high-quality development. In recent years, China's investment landscape has been characterised by "high-tech investment outpacing the overall rate of investment, infrastructure investment remaining resilient, and manufacturing investment growing steadily". Investment in high-tech industries has maintained strong momentum; for the full year of 2024, investment in high-tech industries grew by 8.0%, with high-tech manufacturing and high-tech services growing by 7.0% and 10.2% respectively. Specifically, growth was particularly significant in fields such as aerospace, electronic communication equipment, professional technical services, and the commercialisation of research findings. For instance, investment in the manufacturing of aerospace vehicles and equipment surged by 39.5%. In the first half of 2025, investment in high-tech industries continued to maintain double-digit growth, with the rise in high-tech services investment being particularly prominent, indicating that China is consistently increasing investment in high-tech fields to foster new drivers of growth.

3. Building a Unified National Market: Removing Bottlenecks and Obstacles and Promoting "Five Unifications and One Opening"

‍Currently, China has firmly established its position as the world's second-largest consumer market for goods and the largest online retail market. At the same time, the scale of China’s market for capital, technology, and data is expanding rapidly. During the "15th Five-Year Plan" period, we must continue to expand market scale and promote structural reform to modernise China’s market system. The Fourth Plenary Session set out guidelines to "remove bottlenecks and obstacles hindering the development of a unified national market".

To achieve this goal, the CPC Central Committee and the State Council have proposed a series of specific measures, which can be summarised as "Five Unifications and One Opening". Specifically, the "Five Unifications" include:

• Unifying basic market institutions and rules: This includes refining systems for property rights protection, market access, and social credit to ensure the consistency of rules.
• Unifying market facilities and standards: In particular, establishing well-aligned distribution rules and standards and pursuing higher standards in enhancing market facility connectivity to cut logistics costs throughout society.
• Unifying factor and resource markets: This includes promoting the free flow and efficient allocation of factors such as land, labor, capital, technology, and data over a wider range.
• Unifying goods and services markets: Breaking local protectionism and market segmentation, and eliminating unreasonable entry barriers.
• Unifying market regulation: Strengthening law enforcement against monopolies and unfair competition, to promote a fair and orderly business environment.

"One Opening" refers to opening up both internally and externally. This entails not only breaking down barriers between domestic regional markets but also proactively benchmarking against high-standard international economic and trade practices. By using opening up to drive reform, we aim to facilitate efficient connectivity between domestic and international markets.

4. Integration of a "Functioning Government" and an "Efficient Market" to Release Market Vitality

‍The core of China's socialist market economy lies in the integration of the "invisible hand" (the market) and the "visible hand" (the government), leveraging both the market's role in resource allocation and the government’s role in devising policies to remedy market failures. The Fourth Plenary Session clearly stated that the "15th Five-Year Plan" period must persist in combining an efficient market with a functioning government, providing the fundamental guideline for resolving development challenges and stimulating endogenous power.

On the one hand, the socialist market economy system implies improving resource allocation efficiency through an "efficient market," which is reflected in:

• Free flow of resources: Through deepening reforms for the market-based allocation of resources and breaking administrative barriers, capital, land, labour, data, and technology can flow freely nationwide and be priced according to market mechanisms.
• Market competition to stimulate innovation in enterprises: State-owned, private, and foreign enterprises alike can drive technological innovation and benefit through competition.
• Optimised allocation through pricing mechanisms: Through reformation of pricing mechanisms for energy, land, and capital, to allow prices to truly reflect supply-demand relationships and resource scarcity. This will enable optimised allocation of resources on a societal scale.

On the other hand, the market is not omnipotent; it has natural limitations such as externalities, information asymmetry, and insufficient supply of public goods. Therefore, the "functioning government" needs to exert force in the following areas:

• Macro policies: The government uses fiscal, monetary, industrial, and regional coordination policies to stabilise market expectations and aggregate demand during economic fluctuations, preventing downside risks.
• Scientific and technological innovation: In the technology sector, government needs to compensate for the market’s propensity for quick return, by building national strategic scientific and technological capabilities on a long-term and sustained basis, as well as encouraging and facilitating patient investments in technologies.
• Public services and social fairness: The Fourth Plenary Session proposed "investing in human capital". This entails channeling resources into areas such as education, healthcare, skill training, and social security to provide inclusive public services, mitigating issues such as unfair market distribution and widening income gaps, and releasing the potential of human capital.
• Legal and institutional safeguards: The government needs to strengthen law enforcement and judicial administration to protect property rights, intellectual property rights, fair competition, data security, and privacy protection. This ensures that all economic entities have equal access to factors of production and compete in the market on a level playing field and that their lawful rights and interests are effectively protected.

A "functioning government" and an "efficient market" mean the government does not overstep or absent itself—doing what it should and refraining from what it shouldn't—while the market does not fail or stagnate. The government provides institutional guarantees and directional guidance to spark market vitality, ultimately to achieve the objectives of “measured macro-control, vitalised micro-entities, an orderly society, and robust development”.

IV. Accelerating the Fostering of a New Pattern of Development: Internal and External Interaction and High-Standard Opening Up

1. Building a Modern Market System to Strengthen Domestic Circulation

‍Cultivating and unleashing the potential of the domestic market to form a robust domestic market is both a strategic goal and an intrinsic requirement for the coming period. The 15th Five-Year Plan period should centre on building a modern market system. This entails refining fundamental institutions, such as laws and regulations, resource allocation mechanisms, and incentive-constraint compatibility, as well as perfecting regulatory frameworks and rules regarding opening up at the institutional level.

We must accelerate the fostering of a robust domestic market that is efficient, well-regulated, fair, and fully open, thereby enhancing the endogenous momentum and reliability of domestic circulation. We should align with trends in industrial division and factor distribution, deepen economic system reforms, and promote equal access to basic public services. Crucially, we must optimise fiscal distribution relationships between regions where R&D originates and where its outcomes are commercialised, and ensure unimpeded economic flows across production, circulation, and distribution. These measures aim to better incentivise local governments to proactively uphold a unified national market.

2. Promoting High-Standard Opening Up to Enhance the Quality of International Circulation

‍The Fourth Plenary Session emphasised the commitment to open cooperation and mutual benefit, and the steady expansion of opening up at the institutional level. China is currently prioritising institutional opening up to move toward comprehensive, high-standard opening up. Internally, the focus is on eliminating barriers to a modern market system by leveraging the synergy between "at-the-border" and "behind-the-border" institutional frameworks. Externally, the goal is to enhance the compatibility of China’s trade and economic rules with those of other economies, particularly the majority of developed nations, thereby aligning China's market system with international standards.

China remains steadfast in upholding the WTO-based multilateral trading system and is benchmarking fully against the high standards of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Digital Economy Partnership Agreement (DEPA). China will accelerate negotiations to upgrade RCEP rules regarding trade in services, digital trade, and intellectual property, while actively promoting the expansion of RCEP membership.

Furthermore, China intends to resume negotiations on the China-Japan-ROK Free Trade Agreement, advance the Free Trade Area of the Asia-Pacific (FTAAP) and regional economic integration, and improve the utilisation rates of existing free trade agreements. By actively leveraging cooperation platforms such as the Belt and Road Initiative and the BRICS mechanism, the country aims to sign free trade agreements with more partners, further expanding a global network of high-standard free trade areas. These measures are designed to facilitate more effective global resource allocation and foster collaboration in building an open world economy.

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