China unveils five-year plan to ''dominate AI, tech race

Beijing [China], March 6: China on Thursday set out a five-year roadmap to turbocharge scientific breakthroughs and embed AI across its industrial economic machine, framing technological dominance as a core national security goal in its sharpening rivalry with the U.S.
In its 15th strategic plan since adopting Soviet-style quinquennial policy cycles in the 1950s, Beijing has outlined a bet that technology - not consumption - will drive its next phase of development despite growing structural pressures.
The objectives reflect President Xi Jinping's vision of developing "new productive forces" to escape the middle-income trap, counter the demographic downturn, and enhance self-sufficiency to insulate China from U.S. export controls.
At the opening of the annual parliament meeting, Premier Li Qiang ​praised China's ability to withstand U.S. President Donald Trump's tariff hikes, but said "multilateralism and free trade are under severe threat," announcing ​7% increases in the defense budget, as well as in research and development.
Li acknowledged an "acute" imbalance between strong supply and weak demand and risks from a worsening property sector crisis and high local government debt.
These challenges have pushed Beijing to set a slightly lower growth target of 4.5%-5% for 2026, down from last year's 5%, which was met largely through a one-fifth surge in its trade surplus to a record $1.2 trillion.
As widely expected, the five-year plan also pledged a "notable" increase in household consumption, without specifying figures, dampening expectations for demand-side reforms.
Last year's trade punches with the Trump administration, which briefly escalated to embargo-like conditions of triple-digit tariffs, showed the importance of its supply chain dominance as leverage.
China vowed to maintain its competitive edge in rare earths.The U.S. and its allies are still years away from breaking their reliance on China for these materials vital to everything from AI chips to defense systems.
"China's government remains laser-focused on spurring technological breakthroughs and high-tech investment," said Fred Neumann, chief Asia economist at HSBC. "In part, this is motivated by competition with the United States for control over the technologies of the future." "Many international observers may be left disappointed, therefore, by slower progress in rebalancing the economy away from investment towards consumption." China invests 20 percentage points of GDP more than the global average, while its households spend roughly 20 points less - a state-controlled, debt-driven development model that analysts say creates industrial overcapacity and fuels trade tensions abroad and deflationary pressures at home.
"The rebalancing challenge that China faces, and that will take years to achieve, is implicitly acknowledged by a weaker growth target for the coming year," Neumann added.
The five-year plan aims to raise the value-added of "core digital economy industries" to 12.5% of GDP and roll out new policies for an integrated national data market, AI adoption across the full supply chain, and an AI security system.
Ambitions span biomedicine, quantum tech, atomic-scale manufacturing, hyper-scale computing clusters, nuclear fusion, brain-computer interfaces and even commercializing AI-powered humanoid robots.
"Beijing is trying to manage a 'controlled glide' in growth while building a new economy based on technology rather than property," said Andy Ji, Asian FX & rates analyst at ITC Markets.
"It is a high-stakes rebalancing where the government is betting the house on AI and advanced manufacturing." State-owned enterprises were enrolled to create demand for made-in-China semiconductors and drones.
The 141-page plan name-checks AI over 50 times, envisioning robots plugging labor shortages and factories operating with little human oversight. It builds on a breakout year for Chinese developers - led by DeepSeek - who rapidly closed the gap with U.S. leaders such as OpenAI and Gemini.
But the five-year plan also lists bigger ambitions in areas China already dominates: it accounts for 85% of the world's electric vehicle charging stations, but still aims to double their number ​within three years.
Economists say a lower growth target allows Beijing to experiment with cutting overcapacity in low-value added industries, but cautioned that this did not mean ​a departure from its production-focused growth model.
The U.S. Supreme Court's decision to strike down some of Trump's tariffs and expectations that a meeting between the two countries' presidents later in March could stabilize relations in the short-term bode well for such adjustments.
Dan Wang, China director at Eurasia Group, said Beijing appeared to take advantage of "the trade truce" to absorb job market pressure by any production curbs.
Stimulus-wise, China plans a budget deficit of 4.0% of GDP and has set special debt issuance quotas at 1.3 trillion yuan ($188.5 billion) for the central government and 4.4 trillion yuan for local authorities - unchanged from last year.
China pledged to raise minimum monthly pensions by 20 yuan per person and basic medical insurance subsidies for rural, non-working people by 24 yuan - marginal, rather than structural, moves. It said it wants to ​increase education spending, subsidize childcare and reform public hospitals, acknowledging the demographic downturn.
Yuan Yuwei, fund manager at Trinity Synergy Investment, warned that China's growth and policy aims for this year - prepared at the end of 2025 - do not take into account the U.S.-Israeli attacks in Iran.
"That's very negative for China, which counts the Strait of Hormuz as a crucial trade route," said Yuan.
Source: Qatar Tribune