Our take on China’s Fourth Plenum: a more assertive shift to domestic demand

Highlights: China’s Fourth Plenum outlines a clear demand-side-driven growth shift in the 15th Five Year Plan (FYP) and the need to focus on internal development and self-sufficiency amid heightened external uncertainty. With more assertive languages used than the 14th FYP, the latest communiqué stays on the strategic course of “China’s high-quality development” and key strategic focuses on domestic demand supply, technologic innovation, household and consumer wellbeing.

• The Plenum approved the Chinese Communist Party’s proposals for the fifteenth FYP covering 2026 to 2030, regarded as a “critical transitional” period in China’s ambition of becoming a “moderately developed country” by 2035 through socialist modernisation
• The communique calls for resilience and self-sufficiency amidst heightened uncertainties and shifting economic policies focus to “demand side expansion” in the new FYP. The focus on supply and demand rebalancing, promoting technology innovation, harnessing household willingness to consume and stabilising the property market, are in line with our expectations
• In the press conference on 24 October, the CCP highlighted seven key focus areas, including high quality development, technology self-sufficiency, further economic reform, social development, people’s livelihoods, environmental-social-governance (ESG) and national security. It also said China would use its large domestic market as an advantage to roll out new use cases from innovations, for domestic companies as well for foreign companies
• We maintain mild overweight on both Chinese onshore and offshore equities, with a barbell strategy to keep exposure to the tech sector and high dividend quality stocks. Our conviction on China’s innovation is driven by wider AI application and adoption and an increasingly self-reliance-focused hardware and software ecosystems. Our barbell strategy helps portfolios to weather uncertainties in Sino-US trade negotiations and volatilities in cyclical Chinese data. We maintain a neutral view on the RMB, with an end-2026 USDCNY target of 7.05