Much of the recent attention devoted to the US-China relationship has focused on the October 30 meeting between presidents Donald Trump and Xi Jinping in Busan, South Korea. There, the two leaders struck a deal that reduced trade tensions and, at least temporarily, seems to have ameliorated several highly contentious issues. It was clearly a positive diplomatic step—although many more are needed.
But another event last month may ultimately do far more to determine both the deeper, longer-term economic relationship and the outcome of the intense technological competition underway between China and the United States.
From October 20 through 23, the Central Committee of the Chinese Communist Party held its Fourth Plenum in Beijing. The plenum discussed and foreshadowed the country’s fifteenth five-year plan. It will be the authoritative government policy blueprint for the Chinese economy over the next half decade.
While the final plan will not be formally released until March 2026, the communiqué that emerged from the October meeting provides an early indication of where Chinese economic policy is headed. Americans should pay close attention. These plans will have a major effect on the US economy; US international leadership in many aspects of business, science, economics, technology, and foreign policy; and US national security for years to come.
I’ve visited China frequently since the early 1970s, beginning when I served as a senior economic advisor to then-National Security Advisor Henry Kissinger. I have continued to meet with senior Chinese leaders and officials, many of whom have worked on the development of earlier five-year plans, and I have observed how these plans have changed over time. Earlier versions were built on an old Soviet model with specific production targets for items such as steel, cement, ships, and grain. They have since become authoritative “guidance-oriented” documents, with major changes especially evident during the period when Chinese leader Deng Xiaoping and Premier Zhu Rongji exerted their influence over the process.
Beginning in the early 1980s, Deng made famous the term “socialism with Chinese characteristics.” Under this policy theme, the Chinese Communist Party would remain at the center of economic power, but the Chinese economy would become somewhat more market-oriented. The policy established the early basis for the breathtaking economic and technological progress that China has made in the past several decades.
US officials and business leaders should study both the October 23 communiqué and, when it is released, the actual five-year plan in order to assess what China’s economic policies and ambitions mean for the United States. They will also need to consider how to respond to the economic, technology, and security challenges—and perhaps a few opportunities—that it poses.
Reading between the lines
As with most such communiqués, the one released in October often speaks in very general terms. The party’s goal here is not to provide specifics, but rather to signal a policy direction through carefully chosen language, and to convey major points of policy emphasis.
In this case, a few notable phrases stand out. One is that “high-quality development” should be a major focus, suggesting that China intends to enhance its status as a major producer of advanced industrial products. This is already evidenced by its dominant role in products such as electric vehicles, integrated wireless communications technologies, and solar panels, based on increasingly advanced technologies and production practices.
A second notable phrase is that “reform and innovation” will be “the fundamental driving force” for the country. More specifically, the communiqué speaks of the need for “substantial improvements in scientific and technological self-reliance and strength.” It continues:
- We should enhance the overall performance of China’s innovation system, raise our innovation capacity across the board, strive to take a leading position in scientific and technological development, and keep fostering new quality productive forces.
Importantly, the communiqué reinforces the link between technology and the military, noting the need for “further advances in strengthening the national security shield” and for bolstering “the military through reform, scientific and technological advances.” Additional emphasis is placed on increasing the already close interaction between military-oriented and civilian-oriented industries, especially when the latter produce items that the military can quickly and strategically use. A recent live-fire drone exercise in Inner Mongolia suggests how much integration there is already.
While the United States is not mentioned in the document, there are oblique references to growing US-China tensions: “We must,” the communiqué states, “proactively identify, respond to, and steer changes, demonstrate the courage and competence to carry forward our struggle and dare to brave high winds, choppy waters, and even dangerous storms.” Here “storms” of American origin are doubtless what Chinese leaders had in mind; Xi has used similar language in speeches in the past. To make the point even more vividly, he emphasized during the recent plenum the priority he attached to winning “the strategic initiative amid fierce international competition.”
Elsewhere, the communiqué states that “strategic opportunities exist alongside risks and challenges, while uncertainties and unforeseen factors are rising.” The only other phrase that rises to that level and seems to be written with the United States in mind is the call for “self-reliance and self-strengthening in science and technology.” This signals an intent to reduce the country’s dependence on foreign suppliers who might attempt to use China’s reliance on their products for negotiating leverage or to apply political or strategic pressure.
To put these measures into historical context, it’s hard to overestimate how deep and politically sensitive memories are in China about the history of foreigners using strategic leverage to put political or military pressure on the country. When I first visited China, while Mao Zedong was still its dominant leader, I was often reminded of his statement:“We are bullied by others.” To this day, China is determined to ensure that this never happens again.
American business leaders, as well as top US economic and defense officials, will need to pay particular attention to how the plans relate to China’s desire to enhance its role as an already enormously competitive industrial power, often in products formerly dominated by the United States or the West. They should also anticipate a multitude of new regulations, data-privacy and protection policies, and techniques for global advancement of Chinese-centric advanced technology hardware and software. Elaboration of policies on technologically critical rare-earth minerals is also likely. US military strategists especially should take note of rapidly growing connections between technology and national security. These elements will affect virtually all aspects of China’s relations with the United States.
Competition for the best and brightest
US policymakers should heed China’s efforts to accelerate the scientific talent behind its technological development. Beijing wants to recruit a new wave of world-class scientists, researchers, and innovators—many of whom are now in the United States—to work with its own world-class teams. It is also trying to entice Chinese researchers back from US companies and research centers. Both efforts could be bolstered by what Chinese leaders see as Washington’s sudden introduction of a host of new policies hostile to basic scientific and medical research. These US policies are causing many researchers and scientists to look for new opportunities abroad.
Both Deng, the former Chinese leader, and Zhu, the former Chinese premier, were strong advocates of Chinese students and researchers going abroad, especially to the United States—a practice that had been largely forbidden during the Cultural Revolution. In one memorable meeting that I and a small group of international colleagues had with Deng, he asserted that this was one of the decisions of which he was most proud. When these students returned, he said, they would “change China.”
One manifestation of this change was the development of a more market-friendly five-year planning process. Another was more competitive practices by both state-owned enterprises and the few but rapidly growing number of private companies.
For many years, much of China’s technological progress was attributed to Chinese companies finding various ways—some through illicit methods and some through normal business transactions—of obtaining advanced foreign technology. Now, however, many advanced Chinese products come from Chinese-originated, highly successful technology—a process known as “indigenous innovation.”
China’s indigenous innovation has grown rapidly of late to include sophisticated drones, impressively engineered robots, advanced electric vehicles (EVs), new generations of chips, widely used 5G technology, surprise advances in artificial intelligence (AI), advanced solar energy and battery technology, and fast, comfortable trains.
Some of the funding for advanced technologies in China comes from private capital, much of it from abroad, but huge sums also come from the government. Xi has determined that China should become the preeminent technology power in the world. Moreover, he wants Chinese businesses to provide the infrastructure that other countries, particularly in the Global South, use to build their data and telecommunications networks. He also wants these companies to sell them EVs and other technology. And he wants to supplant the United States as the most important force shaping global rules and network systems to make them more friendly to Chinese economic and political interests.
In the view of many Chinese officials, the next steps in the technology race will depend primarily on the skills of a rapidly growing number of formidable Chinese scientists, researchers, and innovators. But China also sees the potential for attracting scientists and researchers from abroad, as the United States has done for decades.
At the end of the same meeting mentioned above, Deng pulled me aside. Observing that I was probably the youngest member of our delegation, he told me that it would be good for US-China relations if significant numbers of bright young American scholars and scientists could visit, study, and work in China. He asked if I thought that were possible. I replied that I thought many young people would be interested, under the right conditions. He smiled and said, “Please tell your friends that I hope they do come. They will be very welcome.”
Over the years, Deng’s hope has materialized, probably beyond his wildest dreams. China is tapping into top talent, in numerous cases from the United States, to advance its remarkable technological rise. But until now it has had to compete with great American universities and research centers that were able to attract, support, and retain leading US and foreign scientific and research talent—often thanks in part to generous US government grants from the US National Laboratories, the National Science Foundation, and the National Institutes of Health.
Recent US policy changes present an opening for China’s leaders. According to a survey by Nature of more than 1,600 scientists in the United States, about 75 percent are considering leaving the country. Many of those who said they have thought about leaving are young, up-and-coming researchers and post-docs. And while most listed Canada and Europe as potential destinations, some doubtless have their eyes on China. A major reason given for their desire to leave the United States was major cuts in government grants for scientific and medical research—and the resulting cuts in jobs for researchers and post-docs in those areas.
Beijing clearly sees this as a golden opportunity. This summer, China announced a new “K visa” category that is designed specifically for young science and technology talent from abroad. The new five-year plan will surely reflect a desire to capitalize further on this opportunity.
Building economic and technology alliances
While China has very few military alliances, it does have a great many economic- and technology-oriented ones—especially with Singapore and other countries in Southeast Asia. And Chinese technology, through such formidable telecommunications companies as Huawei, is a key link to other nations. Solar-energy infrastructure and harbor development are other areas for collaboration. Sales of low-cost, gas-saving autos, especially electric vehicles, are yet another. Also, China is playing a key role in establishing the digital ecosystems of many of these nations, mostly in the Global South, likely giving Beijing enormous access to their data.
One major follow-up to the new five-year plan, hinted at in the communiqué, is likely to be a focus on strengthening these kinds of linkages. By attempting to achieve technological preeminence and by working with such countries, China seeks to assume a leadership role in shaping the twenty-first-century economic order to its benefit. It is a prospect that US policymakers should bear in mind when engaging in massive and disruptive funding cuts. China is positioning itself to lead the effort to write the future international rules affecting many areas of science and technology to its advantage. At the same time, the United States is pulling back and, consequently, its influence in this area is waning.
Domestic confrontations vs. domestic cohesion
China has not failed to observe the political and ideological chasm—and the dismaying acrimony—in the United States over support for scientific and medical research and innovation, along with collapsing US support for global economic institutions such as the International Monetary Fund, World Bank, and World Trade Organization. Chinese officials with whom I have recently spoken see these developments as examples of weakening US potential to sustain international leadership in many economic areas.
Meanwhile, the Chinese government has been using its five-year plans as a vehicle for strengthening internal collaboration and cohesion among key players in science and technology. While the plan traditionally is developed under the leadership of the Chinese Communist Party, it is the result of years of consultation with nongovernmental experts, private-sector companies, environmentalists, technology leaders, and university researchers from around the country. This process narrows differences among these experts and creates a sense of national unity around the final plan. While the Chinese Communist Party’s decisions still prevail, collective participation enhances the prospects of acceptance and implementation. This is certainly true in research, technology, and innovation.
The planning process is also one way of enhancing policy consistency, continuity, and predictability. This predictability creates a more stable environment for investment and business decisions—assuming, importantly, that party intervention can be kept to a minimum. Chinese leaders are quick to contrast their approach with political and policy uncertainties and unreliability in the United States.
To be sure, China’s is far from a perfect system. Many significant problems still exist. Youth unemployment remains high. Investment continues in the production of goods where there is already massive overcapacity. Private investment has lagged expectations. Household consumption is exceptionally low as consumers remain relatively cautious. Indeed, as the communiqué indicates, encouraging considerably more consumption is a high priority for party leaders. The government also is still grappling with how to govern and regulate AI. And fully integrating foreign scientists, with different languages and backgrounds, is often challenging.
How the United States should respond to China’s plans
Nevertheless, US policymakers need to come to terms with a central fact: The United States now faces, in China, the most formidable economic and technology competitor it has encountered in nearly a hundred years. And the United States is doing so at precisely the same time that it is engaging domestically in more intense, partisan, and harmful confrontations and divisions on many subjects critical to its future financial stability and technological and scientific competitiveness.
Such deep divisions at home are inflicting harm on the very institutions and principles that made the United States the world leader in the areas noted above for many decades. And while Americans struggle with rancorous domestic divisions, project dysfunction over such basic issues as keeping the government open and planes flying, and indulge in partisan hostility to science and research, China’s role in important areas of technology and its public pronouncements around the world, especially in the Global South, about the dysfunctionality of the US government and governance model have increased.
It might be easiest to start with what the United States should not to do in response to this challenge. Decoupling from China is not an effective answer; US dependence on China for rare-earth minerals and ingredients in many pharmaceuticals illustrate as much. Nor are a full-scale effort to contain China or hoping the relationship returns to what it was a few decades ago. Nor is a prolonged and unstable confrontation with Beijing, which is not in the interest of either great power. Nor is waiting for some Sputnik-like moment to awaken the United States to the challenge.
The awakening needs to come from within. The United States has enormous competitive strengths and a plethora of leading companies. It has abundant labor skills, world-class scientific expertise, highly successful research labs, and globally respected universities. It has an impressive history of entrepreneurial capitalism and competitive markets dating back decades. But if the United States continues to succumb to hostile partisan divisions on major economic and technology issues—and if its policies continue to damage the scientific, educational, technological, and basic research traditions and institutions that have driven its achievements in the past—then the United States’ economic future and scientific preeminence will become more and more uncertain.
Some US politicians see China’s successes as an economic threat and advocate engaging in a slew of punishing measures in areas such as trade and investment. But much as some in Washington may hope, the United States will not win its competition with China this way. Some tough trade and investment measures may be justified from time to time to defend US economic or security interests. Many others, however, will likely be of dubious benefit or counterproductive, or invite painful retaliation from China.
Rather, the United States should rise to the challenge of China’s economic and technological ascendance by supporting sound fiscal policies, increases in basic research, more funding for advanced science, higher quality education for more Americans, an attractive environment for foreign students and researchers, and other elements essential to growth and competition.
US leaders should see competition with China as a wake-up call—an opportunity to pull together US society at home, recognize the roots of the long history of US economic and strategic success, and mobilize its historic economic advantages and its resources to meet the competitive challenges that will define the twenty-first century.
The United States’ economic future will be determined not by a document, however dynamic, of another great power across the Pacific. But the policies in that document should serve as a wake-up call—a test of US ability and will to successfully meet the challenges the country now faces at home and abroad to advance its principles and interests in the face of twenty-first-century realities.
Robert Hormats is a member of the ’s board of directors and a former US undersecretary of state for economic, energy, and environmental affairs.
Image: Chinese National Development and Reform Commission (NDRC) Chairman Zheng Shanjie, and Han Wenxiu, director from the Central Rural Work Leading Group, attend a press conference on the fourth plenum of the Chinese Communist Party Central Committee, in Beijing on October 24, 2025. (REUTERS/Maxim Shemetov)
