Neither Beijing’s New Economic Plan nor Trade Truce With US Can Save China’s Economy

Commentary

Chinese leader Xi Jinping appears to believe that the 15th Five-Year Plan and the détente in the China–U.S. trade war will revive the Chinese economy, but they won’t.

U.S. President Donald Trump met with Xi on Oct. 30 at Gimhae Air Base in Busan, South Korea. It was their first meeting in six years, and both leaders hailed it as a success.

The summit produced a one-year trade truce and several key agreements: The United States would ease tariffs, and, in turn, China would resume U.S. soybean imports, delay export restrictions on five rare-earth metals, and intensify efforts to curb fentanyl trafficking. The deal included a reduction of U.S. tariffs on Chinese goods from 57 percent to 47 percent, and Trump rated the meeting “a 12” on a scale of zero to 10.

However, the meeting lasted only about one hour and 40 minutes, suggesting that discussions were confined to pre-settled topics. More importantly, the agreement remains informal, nothing was signed, and further negotiations are still required. Trump merely suspended plans for an additional 100 percent tariff, meaning both sides have avoided escalation but have yet to reach a binding resolution.

Chinese media have claimed that the future looks brighter following the summit and that China remains an attractive destination for investment. Xi echoed this optimism, declaring, “Facts have proven that whoever gains a foothold in the Chinese market will be able to seize the critical opportunity in increasingly fierce international competition.”

He also said, “Investing in China is investing in the future.”

He linked this confidence to the upcoming 15th Five-Year Plan (2026–2030), describing it as a “window of opportunity” for sustained growth and expanded international cooperation.

Xi’s broader recovery strategy centers on what he calls “high-quality development,” emphasizing technological self-reliance, reform, improved living standards, and national security. Yet China has pursued high-tech advancement and value-added production for more than a decade without achieving the desired results.

The 15th Five-Year Plan largely repeats earlier ambitions under slogans such as “technological self-reliance,” “advanced manufacturing,” “industrial upgrading,” “boosting domestic consumption,” and “green transition,” as well as the “AI-Plus” initiative, all framed within an ambitious set of modernization goals.

The goals outlined in the 15th Five-Year Plan largely repeat policies and ambitions found in previous plans and Chinese Communist Party (CCP) documents dating back more than two decades. Many of these ideas, such as high-tech development, were first introduced as early as the 1980s.

The concept of technological self-reliance traces back to 2005–2006, when China launched its Medium- and Long-Term Plan for the Development of Science and Technology, which introduced the term “indigenous innovation.” This was built on earlier concepts of “self-reliance” from the Maoist era, evolving into “self-reliance and self-improvement” in more recent years. The roots stretch even further back to the 863 Program of 1986, one of China’s earliest initiatives for advancing high-tech industries.

Subsequent policies continued this trajectory. Made in China 2025, announced in 2015, focused on upgrading manufacturing and moving up the global value chain. The 2010 Strategic Emerging Industries initiative had already identified seven key sectors, including high-end equipment and next-generation information technology. The 14th Five-Year Plan (2021–2025) reinforced these priorities, emphasizing industrial modernization and technological autonomy.

Xi’s “dual circulation” strategy, introduced in 2020 and incorporated into the 14th Five-Year Plan, aimed to strengthen domestic production and consumption while reducing dependence on foreign demand. The 11th Five-Year Plan (2006–2010) included “green” objectives, but these focused on pollution reduction rather than economic transformation. While China profits from manufacturing and exporting “green” products, a complete transition away from coal and heavy industry would erode its manufacturing base and threaten overall economic stability.

Long-term modernization goals, such as achieving “moderate development” by 2035, have likewise been reiterated across successive five-year plans. The 15th Five-Year Plan restates previous and existing goals without providing a mechanism to achieve them.

Xi appears to believe that lifting U.S. tariffs and restoring the United States as a major export destination will bring manufacturing and foreign investment back to China, setting the stage for the 15th Five-Year Plan. However, investors remain cautious. Experience shows that if China breaks the agreement—a likely outcome—Trump would quickly reinstate tariffs, leaving factories unable to export to the United States or access key technologies.

Investor confidence has also eroded under China’s strict capital controls and Xi’s tightening grip on both domestic and foreign companies. Rising labor costs, a shrinking pool of young workers, and growing competition from Chinese brands have made China an increasingly difficult place for foreign businesses. Starbucks’s Nov. 3, 2025, decision to sell control of its China operations to Boyu Capital for $4 billion illustrates the trend; its market share fell from 34 percent in 2019 to 14 percent in 2024.

Western consumer brands such as Nike and Adidas have faced similar struggles as domestic companies such as Anta and Li-Ning gain dominance. Nike’s Greater China revenue dropped from $7.25 billion in 2023 to $6.59 billion in 2025, with quarterly sales plunging by more than 20 percent. This shift reflects the rise of “guochao,” the “national wave,” as younger consumers increasingly favor local brands, which undercut foreign brands on price.

Meanwhile, China’s broader economic troubles persist. The manufacturing sector is slowing, and external demand remains weak. The debt-laden property market has turned from an engine of growth into a ticking time bomb, with investors bracing for the next major default. National debt now stands at roughly 309 percent of gross domestic product, and many local governments are close to insolvency, unable to finance infrastructure or development projects crucial to the 15th Five-Year Plan. Deflation, weak consumer demand, and high youth unemployment continue to weigh on the economy.

Beijing’s focus on manufacturing, artificial intelligence, and advanced technology—pillars of the new plan—risks worsening overcapacity in sectors already suffering from sluggish demand. In the end, the CCP’s two supposed engines of recovery—the 15th Five-Year Plan and the China–U.S. trade agreement—offer little substance. The plan remains a set of vague objectives without actionable policies, while the trade deal has yet to be formalized in writing.

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.