Why China must strengthen its real economy in the 15th Five-Year Plan

Editor's note: Cheng He is a CGTN commentator. The article reflects the author's views and not necessarily those of CGTN.

In an intelligent polyester workshop run by a top Chinese chemical fiber manufacturer, workers monitor rows of humming winding machines steadily producing spools of polyester filament. Not long ago, they would have manually lifted the large, heavy rolls onto carts, preparing them for the next stage of the supply chain. Today, that strenuous task has been handed over to autonomous doffing robots. Outside, late summer was fading into early autumn, a cool breeze rustling through the factory yard. But inside, the air was thick with heat, humidity and the constant hum of machinery — even in one of the most advanced factories in the sector.

This workshop is a microcosm of millions of factories across China, a manufacturing powerhouse that produces roughly one-third of the world's goods. Even with high-level of automation, working at a factory is still hard — repetitive and sweaty work — the kind that many developed economies have long abandoned in favor of comfortable, less labor-intensive office jobs. For rapidly developing countries like China, the temptation to follow that path is strong, but the stakes are high: turning away from the real economy could come at a steep cost.

Doubling down on the real economy

Recognizing this, China is making a deliberate choice to reinforce the foundations of its productive sectors. As China prepares its 15th Five‑Year Plan (2026–2030), one of the clearest signals is a renewed commitment to "strengthen the real economy." This is explicitly spelled out in the new plan's chapter on Building a Modernized Industrial System and Reinforcing the Foundations of the Real Economy, where the leadership says a modernized industrial system "provides the material and technological foundations for Chinese modernization."  In a world where many developed economies have drifted toward financialization and hollowed‑out industry, China's choice to double down on its tangible, productive sectors — manufacturing, infrastructure, and services with real output — is not conservative; it is strategic.

The "real economy" refers to the part of the economy that produces goods and services, as opposed to the financial sector, which mainly circulates capital and assets. In China's case, this includes its manufacturing powerhouses, energy and logistics networks, digital industrial clusters and productive service industries. In fact, the plan emphasizes that the share of manufacturing in the national economy "should be kept at an appropriate level" and that the modernized industrial system "should be developed with advanced manufacturing as the backbone." Over the next five years, the leadership aims to upgrade its industrial system, reinforce manufacturing as the backbone, and upgrade both traditional and emerging industries with the real economy front and centre.

Stability, resilience and high‑quality growth

A strong real economy underpins social and economic stability. Industrial and service sectors employing hundreds of millions of workers provide the income base for domestic consumption, keeping social mobility alive and growth inclusive. At the same time, by deepening the real economy, China strengthens its resilience against external shocks — a point explicitly recognized in the plan's call to make China's industrial chains more self‑supporting and risk‑resilient. Beyond stability and resilience, the real economy is essential for high‑quality growth. China's challenge is no longer just growth in scale, but sustained, innovation‑led development. The plan speaks of "smart, green and integrated development" as the direction for the industrial system. Manufacturing and services must be technologically advanced, efficient and environmentally sustainable. A vibrant real economy provides the platform for this transformation — supporting higher wages, greater consumer confidence, and stronger domestic demand.

Lessons from the West: The risks of financialization

China's commitment to the real economy stands in stark contrast with the path taken by many developed economies over the past four decades. Countries like the United States and the United Kingdom embraced financialization, prioritizing capital markets over domestic manufacturing. Industries relocated offshore; domestic manufacturing shrank; once‑thriving industrial regions faced unemployment, wage stagnation and social discontent. Financialised growth produced periods of apparent prosperity through asset inflation but decoupled wealth from productivity, leaving economies exposed to crises such as the global financial meltdown. Moreover, wealth became concentrated in the hands of asset owners and financial elites, while long‑term industrial investment and innovation slowed. China's plan appears designed to avoid such pitfalls — anchoring growth in production and tangible output.

Why China must not take the same path

China's policymakers are acutely aware of these lessons. With an economy of its size and complexity, financial speculation cannot substitute for industrial output. Employment, income distribution and social stability all hinge on the health of real sectors. A strong real economy also supports balanced regional growth — manufacturing and infrastructure investment help uplift less developed regions — whereas financialization tends to concentrate wealth in metropolitan centers. The plan underscores this by emphasizing upgrading traditional industries (mining, metallurgy, textiles, machinery, ship‑building) and fostering emerging industries (new energy, new materials, aerospace, low‑altitude economy). By anchoring finance in the service of the real economy — rather than letting it dominate — China aims to reduce systemic financial risks and channel resources toward industrial upgrading, small and medium enterprises, and green development.

The right kind of transformation

This does not mean China should reject financial development altogether. A healthy financial system is still indispensable for allocating capital efficiently, supporting innovation and deepening market mechanisms. The key challenge for China is ensuring that finance remains a tool of the real economy, not its master. The explicit reference in the plan to upgrading the industrial system, reinforcing manufacturing and building advanced clusters provides a clear blueprint. By anchoring growth in production and tangible output, China aims to secure both stability and long‑term competitiveness in a world where many have learned the hard way that financialized growth is fragile and unequal.