Five-Year Plans: Why Market-Oriented China Keeps Legacy of Planned Economy
China’s proposals for the 15th Five-Year Plan (2026–2030) have just been unveiled at a key Party plenum. The medium-term national development blueprint, spanning policy initiatives on technology, finance, and opening-up, has naturally drawn global attention amid the country’s mounting pressure to secure an economic soft landing and its volatile trade tensions with the United States. Yet its implications run deeper: five-year plans have formed an integral pillar of Xi Jinping’s overarching national strategy.
In Xi’s own words, it would take “three consecutive five-year plans” to basically achieve what he hails as China’s model of modernization by 2035, a milestone target that bears his unmistakable personal imprint. The upcoming 15th iteration of the plan marks the second stage of this grand endeavor. Xi’s vision echoes Mao Zedong’s nation-building project in the early 1950s, when the first of such five-year plans kicked off: “How long will it take to build a great socialist country? I won’t set a fixed time, but roughly three five-year plans, or about fifteen years.”
Xi’s China is a far cry from Mao’s command-and-control system, yet the Five-Year Plans, a legacy of that era, remain very much alive. Defying János Kornai’s bleak verdict on socialist regimes in transition, this policy instrument not only survived the collapse of its birthplace Soviet Union and China’s own political and economic storms that followed, but it also helped propel China to become the only country with geopolitical clout rivaling America.
Why has China retained its own version of the Five-Year Plans? Or, put differently, how did this planning system evolve to survive its existential crisis? And in a global economic powerhouse that is committed to further market-oriented reforms, what role do the remnants of a planned economy still play?
Tug-of-War between Planning and Market
In many ways, the evolution of China’s Five-Year Plans reflects the government’s gradual ceding of its resource-allocation powers to the market. The year 2005 marked the most symbolic moment: the Chinese term for the plan changed from jìhuà, emphasizing exhaustive, prescriptive directives, to guīhuà, highlighting strategic visions that induce changes.
This semantic shift signaled a more profound change, as the 11th Five-Year Plan (2006-2010) introduced at that time had dropped all the output targets for major industrial and agricultural products, targets that had been the plan’s inborn function for half a century, and pivoted to value-based indicators such as urbanization rate, growth in household income, and the share of R&D spending in GDP. By that year, more than 95% of commodity prices in the country were determined by the market, whereas that figure stood at 3% in Mao’s era. This market-oriented trajectory was later confirmed by Xi Jinping shortly after he took office in 2012, who went so far as to elevate the market’s role in the country’s resource allocation to a “decisive” one.
However, it was the state that played that decisive role in the genesis of China’s five-year plan, which was largely modeled on the fountainhead of the modern planning system, Soviet Union. China’s First Five-Year Plan (1953-1957) was set in motion in 1953, when the devastating Korean War finally drew to a close. In return for China’s punishing efforts to contain the U.S. expansion in the Far East, the Soviet Union, following the death of its tight-fisted leader Joseph Stalin, spared no expense in supporting China’s post-war reconstruction centered on its First Five-Year Plan.
At the heart of the plan were 156 projects in heavy industry and infrastructure, almost all designed and built under Soviet supervision. The Soviet transfusion of capital and technology was so massive that it was estimated to account for a staggering 7% of the Soviet Union’s national income in 1959. Within just five years, China rolled out its first domestically produced truck, airplane, and steam locomotive, and built its first oil refinery, machine-tool plant, and vacuum-tube factory—alongside the first bridge spanning the country’s longest river and a modern highway reaching the Tibetan Plateau. Through rigid planning and execution, the nation transformed from an agricultural backwater into one with a fledgling industrial base almost overnight.
Li Fuchun, then head of the State Planning Commission in charge of drafting and implementing the First Five-Year Plan, remarked in a report that China had “caught up in just five years with what had taken decades in old China,” adding that reaching the industrial level of the advanced capitalist nations “would not take a century, but only a few decades”—a prophecy that has largely been fulfilled today.
Contrary to the prevailing myth, China’s five-year plans began neither as a wholesale copy of the Soviet template nor in outright opposition to market mechanisms. In 1953, the year Xi Jinping was born, his father Xi Zhongxun joined the eight-member task force responsible for drafting the First-Five Year Plan. Chen Yun, leader of the group and the Party’s economy czar, famously articulated the principle of “three mainstays, three supplements,” encouraging market forces alongside the guiding role of the planned economy. Even the all-powerful Mao Zedong compared China under the First Five-Year Plan with Soviet Russia prior to the introduction of its own five-year plans, lamenting the premature end of the New Economic Policy, which had tolerated a degree of market freedom. “The state-owned sector and private businesses should coexist,” he said.
Therefore, despite the massive “socialist transformations” that accompanied the First Five-Year Plan, China refrained from replicating the Soviet approach of direct agricultural planning, instead relying on indirect methods. In other sectors, China’s planning tales were also far less detailed than their Soviet counterparts. While reviewing a report on the First Five-Year Plan in 1956, Mao stressed the need to break away from the path dependency on the Soviet precedents.
At the crossroads of policy orientation, however, China opted to lean further toward a central planning system, even as planning became increasingly shaped by the leader’s personal impulses. In 1957, the final year of China’s First Five-Year Plan, Mao visited Moscow for the second time—a trip that triggered the China-Soviet contest over the leadership of the socialist bloc. It was followed by a fantastical slogan of “running toward communism” in an effort to reach the “ultimate state of social forms” before the Soviets. The incremental “socialist transformations” soon gave way to a sweeping annihilation of market elements and the private sector.
Consequently, the relatively cautious Second Five-Year Plan (1958-1962) was superseded by a directive issued by the National Planning Commission that mandated absurdly ambitious targets. The steel production target, in particular, soared from the original 12 million tonnes to an impossible 100 million. Simultaneously, the forced roll-out of the People’s Commune Movement reshaped rural China along fully planned lines, characterized by communal dining halls that drained farmers’ incentives and the “Great Steel Smelting Campaign,” which relentlessly pursued output figures. These policies directly led to the economic hardships from 1959 to 1961.
The subsequent Third (1966-1970) and Fourth Five-Year Plans (1971-1975) either pivoted toward the so-called “Third Front” construction, aimed at preparing for a potential Soviet invasion, or were hampered by the paralysis of the state apparatus during the Cultural Revolution. Notably, most of the economic difficulties that arose under Mao did not stem from planning itself, but from the fact that five-year plans were not formulated through rational deliberation.
As Deng Xiaoping assumed de facto top leadership in 1978, the formulation of five-year plans was freed from the whims of the charismatic leader. On the flip side of the coin, as Deng launched the market-oriented “reform and opening-up,” inaugurating the delegation of resource allocation power to the market, the five-year plans started to face a growing existential crisis.
A clear indication was the diminishing role of the five-year plans in determining annual allocations of personnel, finances, and goods. From the Sixth to Eighth Five-Year Plan (1981-1995), the number of production targets for physical goods dropped from 65 to 29. In 1984, China began allowing state-owned enterprises (all legally recognized enterprises were state-owned at the time, as private firms were not legalized until 1988) to sell surplus industrial output on the market after meeting their five-year plan quotas. This gave rise to a dual pricing system, where products were significantly cheaper within the planning cycle than on the open market. Widespread rent-seeking through speculative arbitrage soon rendered the coexistence of planned and market systems unsustainable.
The final showdown came in 1992, a year pivotal to the very survival of China’s five-year plans. Amid domestic inflation fueling social unrest and a hostile international environment following the upheavals in the Soviet bloc, the semi-retired yet still powerful Deng Xiaoping demonstrated his unwavering resolve to further market-oriented reform during an unannounced southern tour. He made a bold proclamation: “The planned economy does not equal socialism, as capitalist nations also have plans. The market economy does not equal capitalism, as socialist states can also have a market.”
At the Party’s national congress that year, heeding Deng’s warning that “those who refuse to reform will be removed from office,” then General Secretary Jiang Zemin opted for “socialist market economy,” the most radical phrasing defining China’s new economic system, over milder alternatives such as “a socialist commodity economy combining plan and market” or “a planned socialist market economy.” The word “plan” was dropped altogether. It was also at this congress that the market’s role in resource allocation was, for the first time, defined as “foundational”—a linguistic shift that captured China’s historic turn toward market logic within a socialist framework.
Since 1992, the country saw its private sector expand at a hectic pace. Though China’s reform and opening-up nominally began in 1978, the non-state economy’s share of total industrial output inched up only from a negligible 0.49% in 1980 to 13.41% by 1992. With the market economy formally enshrined that year, the change was transformative: by 2000, the private sector accounted for over 64% of industrial output. Post-1992 reforms steered state-owned enterprises toward sectors deemed vital to the national economy such as defense, telecommunications, transport, and conventional energy, while ceding ordinary competitive industries to the private sector. This meant the share of economic activity directly guided by the five-year plans steadily receded with the market taking the driver’s seat.
The dramatic shift raised serious doubts about the relevance of the State Planning Commission, long tasked with directing the allocation of resources across the economy. Some deputies of the top legislature even proposed abolishing the agency along with its core mission of making five-year plans, leaving its staff confused and anxious about their uncertain prospects.
Yet, amid heated debate, the State Planning Commission survived another round of institutional reform in 1993. The reason was twofold. On one hand, the state sector still accounted for a sizable share of the economy, roughly a 40-60 split with the private sector even today, underscoring the continued need for planning. On the other, both the commission and the five-year plans were beginning to undergo a profound functional shift.
The State Planning Commission, according to the 1993 reform blueprint, “should adjust its functions in line with the objectives and requirements of a socialist market economy so as to better play its role in national macroeconomic management.” It indicated the days when five-year plans prescribed detailed industrial and agricultural output targets were numbered, though those quantitative benchmarks were not fully abolished until the 10th Five-Year Plan (2001–2005), around the time China joined the World Trade Organization.
The State Planning Commission itself went through two rounds of renaming, adopting its current title—the National Development and Reform Commission (NDRC)—in 2003. And the five-year plans switched from jìhuà to guīhuà in 2005. Both changes reflected the market-oriented course charted in 1992, transforming the five-year plan from a tool for quantifying outputs of steel or apparel into a broader framework for strategic development. That evolution is precisely what has ensured its survival.
Not Just the Economy, Stupid
In fact, Chinese leaders began to recalibrate the role of the five-year plans as early as the late 1970s. After Mao’s death in 1976, senior officials fanned out across the Western world to see how modern economies actually worked. The State Planning Commission, too, looked abroad to France and Japan—two capitalist powers that had successfully married planning with market efficiency. Both countries centered their plans on social development, an area where market forces alone can sometimes become part of the problem rather than the solution.
Therefore, beginning with the Sixth Five-Year Plan (1981–1985), the plan’s official title was changed from the “Five-Year Plan for Economic Development” to “Five-Year Plan for Economic and Social Development”—a formulation that endures to this day. The change marked a decisive shift in purpose: from micro-management to macroeconomics, and from a narrow focus on production targets to a broader agenda of public service delivery.
In the early post-Mao years, five-year plans remained largely anchored in production quotas, yet their priorities shifted from heavy industry to food, textiles, and other consumer goods. By the Sixth Five-Year Plan, the guiding principle of the planning became “first feed the people, then pursue the construction,” a striking turnaround from the first plan’s “prioritize heavy industry, yet attend to the people” and the third plan’s wartime motto: “prepare for war, guard against famine.”
As market reforms progressed, economic indicators gradually shrank as a proportion of total targets, falling from 60.7% the Sixth to 22.7% in the 11th Five-Year Plan (2006-2010). By contrast, social indicators surged to 90% in the 12th plan (2011-2015). The scope of planning expanded beyond economic metrics to embrace a broad spectrum of social development goals, including ecological protection, cultural advancement, social welfare, land and resource management, and national security.
Education is a case in point. Starting with the Seventh Five-Year Plan (1986-1990), China launched the nine-year compulsory education system. Also, higher education was singled out as a key target for national investment for the first time in that plan. This set the stage for subsequent initiatives such as “the 211” and “985” projects, where the government selected a cohort of universities for prioritized investment to boost teaching quality, research output, and global competitiveness. These initiatives also paved the way for the sweeping expansion of college enrolment in 1999, transforming Chinese universities from an elite privilege into a broadly accessible opportunity. The momentum continues to shape China’s academic landscape today.
After Xi Jinping took the helm in 2012, China’s five-year plans came to place an even greater emphasis on social development. At the 2015 plenum reviewing the 13th Five-Year Plan (2016-2020), the first such plan formulated in Xi’s era, he introduced the epoch-making “new development philosophy,” highlighting a five-pronged principle: innovation, coordination, green development, opening-up, and shared benefits. As Xi put it, this new vision “will chart China’s development trajectory throughout the 13th Five-Year Plan period and beyond.”
Among China’s post-Mao leaders, Xi stands out as one who regards economic growth not as an end in itself, but as a means to an end—the quality and sustainability of development. In a telling reworking of Deng Xiaoping’s famed dictum, “development is the hard truth,” Xi updated it as “high-quality development is the hard truth of the new era,” marking a clear departure from the growth-first paradigm. Therefore, the five-year plan went through a more drastic change in its role.
This shift is pronounced in China’s green transition. While previous leaders started to pay lip service to environmental protection, the country continued to suffer exacerbated pollution, especially during the enormous infrastructure building drive in the wake of the 4-trillion-yuan stimulus package in 2008. By 2015, Chinese cities ranked among the most smog-choked in the world.
As Xi’s “new development philosophy” began to take hold, the 13th Five-Year Plan fired the starting gun of the most ferocious ecological campaign to date. It set binding targets for air, water, and soil quality, and held officials directly accountable for environmental degradation. In just five years, China—still known as the world’s factory—slashed pollution dramatically, recording the fastest improvements in air quality globally. The parallel efforts to curb traditional energy consumption under the plan inadvertently catalyzed a boom in China’s lithium-ion battery and electric vehicle sectors. By the end of the 13th Five-Year Plan, the country had leapfrogged global rivals in both motor technology and EV output.
Another defining feature of Xi’s 13th Five-Year Plan was its dedicated push toward what is regarded as the elimination of absolute poverty. This goal echoes the second stage of Deng Xiaoping’s three-step strategy for China’s modernization: establishing a moderately prosperous society by the turn of the 20th century. Xi translated the abstract notion of a “moderately prosperous society” into a concrete target: the eradication of absolute poverty by the end of the 13th Five-Year Plan.
In an unprecedented move, the plan’s outline devoted one of its 19 sections entirely to poverty alleviation. The initiative included: establishing a grid-based poverty monitoring system, mobilizing the state-owned sector to deliver aid, and pouring resources into infrastructure construction in far-flung areas regardless of cost. In five years, the government alone sent over three million officials to the grassroots to provide hands-on support. Apparently, this was not the most economically efficient allocation of resources, yet such market-defying policy initiatives constitute the cornerstone of the planning.
To break away from the egalitarian mindset amid the market-oriented drive, Deng Xiaoping once said: “Some regions and some people can get rich first, bringing along and helping the others, so that common prosperity can be gradually realized.” The first half of this dictum had largely come to pass before Xi’s tenure. Xi’s ambition, however, has been to turn the second half—the realization of common prosperity—into a concrete reality during his time in office. At the 2020 plenum that was set to promulgate the 14th Five-Year Plan, Xi specifically referred to the plan’s goal of “achieving substantial progress in common prosperity for all.” He said: “This is the first time such wording has appeared in a Party plenary document.”
In a break from tradition, the 14th Five-Year Plan (2021–2025) set no quantitative GDP growth target, signaling a decisive shift in China’s development priorities. Explaining the rationale, Xi emphasized that medium- and long-term planning should concentrate on optimizing the economic structure and improving the quality and efficiency of growth. Although growth was no longer the headline objective, social welfare indicators assumed unprecedented prominence: metrics related to public well-being accounted for more than one-third of all targets—the highest proportion in the history of China’s five-year plans.
At the 2013 National Conference on Organizational Work, arguably the most consequential meeting determining the yardsticks of bureaucratic promotion, Xi decided to reform the evaluation methods to give greater weight to indicators such as improvements in livelihoods, social progress, and ecological outcomes. “Success can no longer be measured by GDP growth alone,” he declared. Therefore, the five-year plans underwent a decisive recalibration under Xi, playing an increasingly central role in China’s broader governance transformation. As one Chinese scholar observed, it is only a matter of time before social development, rather than economic growth, becomes the principal focus of future five-year plans.
Beyond Five Years
In the communique of the recently concluded fourth plenum that mapped out the 15th Five-Year Plan, a previously unseen formulation appeared: “socialist modernization can only be realized through a historical process of gradual and ongoing development.” Behind this apparently fresh wording lies the Party’s enduring commitment to long-term thinking, one that has taken on sharper focus under Xi. The five-year plan, serving as a medium-term playbook, becomes increasingly interlocked with China’s broader long-term ambitions.
In 2015, when preparations for the 13th Five-Year Plan were underway, China unveiled “Made in China 2025,” a decade-long industrial blueprint aimed at transforming the country’s manufacturing sector from labor-intensive to technology-driven through two five-year plans. In both the 13th and 14th Five-Year Plans, technological innovation was accorded unprecedented importance in the layout of the documents. It was positioned as the first substantive section following the introductory chapter, whereas this prominent position was still occupied by rural development in the 12th Five-Year Plan. Both plans have laid out a systematic strategy of advancing the sci-tech sector: reforming institutions, building innovation platforms, nurturing talent, integrating industries, and creating a new system for mobilizing resources nationwide to make key technological breakthroughs capable of surmounting U.S. checkpoints.
China’s pivot to sci-tech innovation in the latest two plans delivered a string of “Sputnik moments” to the West: from lunar far-side landing and quantum computers to open-source large language models. Cutting-edge manufacturing sectors such as electric vehicles, drones, and 5G equipment now occupy a leading position globally, with “Made in China” gradually shedding its reputation as cheap, low-end, and risk-prone. These achievements stem both from state-led technological breakthroughs and private-sector innovation. Increasingly, five-year plans have become a masterful instrument of statecraft, orchestrating the nation’s full spectrum of activities, steering long-term strategic ambitions, and catalyzing profound structural transformation.
In tandem with the 14th Five-Year Plan, China also unveiled Vision 2035, outlining objectives for the next 15 years. In Xi’s view, 2035 is a crucial milestone, representing the first step of the Party’s current “two-step” strategy, which aims to achieve basic socialist modernization. Accordingly, the latest communique defined the 15th Five-Year Plan as a critical period as the country works to “reinforce the foundations and push ahead on all fronts toward basically achieving socialist modernization by 2035.” The second step, in Xi’s own words, is to “use another three five-year plans to build China into a great modern socialist country.” By that point, China’s level of development and its standing on the world stage will likely defy any prediction or imagination from today’s perspective.
As head of the drafting team of the 15th Five-Year Plan, Xi clearly has huge plans for the next five years and beyond. Where past plans pursued expansion, his ambition lies in steering China toward a holistic transformation—one that redefines what development itself means for the nation.
Xu Zeyu, founder of Sinical China, is a journalist with Xinhua News Agency. Email: xuzeyuphilip@gmail.com
Tan Yixiao is a Xinhua journalist. Currently based in Beijing, she spent three years in the U.S. covering politics and international affairs. Email: yixiaotan@live.cn