Concerning the future of China's economy, the fundamental view of ANBOUND is that after the 15th Five-Year Plan, China's economy and society are entering a post-industrial era. During this crucial moment, it would be essential for China to intensify the development of its productive finance. In this regard, ANBOUND's policy recommendations emphasize two main points. The first is a critical assessment of the current situation: China is now at the turning point of post-industrialization. The second is the need to promote productive finance and to build China's version of Wall Street, marking a shift from the previous focus on hard infrastructure construction to a new emphasis on soft infrastructure development.
As things stand, China is approaching a decisive inflection point.
Post-industrial countries refer to nations where the process of industrialization has been largely completed and manufacturing is no longer the dominant sector of the economy. These economies are instead driven by services, knowledge industries, and innovation. Typical examples include the United States, Japan, Germany, the United Kingdom, France, and Canada. In general, most OECD countries today are post-industrial. Compared with countries still progressing along the path of industrialization, post-industrial societies and economies display several distinctive characteristics.
One key feature is that the share of services and knowledge-based industries in the industrial structure continues to grow, with the service sector taking a dominant role in the economy. Typical service industries, such as finance, education, healthcare, information, culture, and entertainment, often account for more than 70% of GDP. China's economy is clearly showing this trend: both the service and technology sectors are developing rapidly. By 2024, the service sector's share had already reached 56.7%, though a gap remains compared with long-established post-industrial economies.
While the share of manufacturing declines, it is becoming more advanced. Traditional manufacturing is contracting, but high-tech, precision manufacturing, defense, and pharmaceutical industries continue to maintain strong competitiveness. At the same time, the knowledge economy is emerging, with research and development, innovation, information technology, and creative industries becoming the new drivers of growth. This pattern is rather apparent in China today. The proposal of "new quality productive forces" has come at an opportune time, and a wide range of high-tech industries, including artificial intelligence, robotics, drones, and new energy vehicles, are thriving and demonstrating tremendous vitality.
Additionally, there is a high level of human capital. The overall level of education across society is generally high, and research and development (R&D) expenditure accounts for a relatively large share of GDP. In the United States, R&D spending is about 3% of GDP, while in South Korea it exceeds 4%. Although China still lags behind these countries, its proportion is already much higher than during its industrial era. By 2024, China's R&D spending had reached around 2.68% of GDP, approaching the level of the United States. In contrast, between 2000 and 2010, the figure in China was only slightly above 1%. Today, China's innovation system is becoming increasingly mature. Collaboration among universities, research institutions, and enterprises is steadily developing, and intellectual property protection has evolved from being virtually nonexistent to becoming more complete and well-established.
Another defining feature is that while economic growth slows, its quality improves. In post-industrial developed countries, economic growth rates are generally lower than during industrialization, typically between 1% and 3% percent, but are more stable and less volatile. The overall economic model has become consumption-driven, with household consumption accounting for a growing share of GDP and domestic demand serving as the primary engine of growth. At the current stage, China's economy is showing the same trend, i.e., consumption has made an increasingly large contribution to economic growth and is becoming the main battlefield of the economy.
On the other hand, the employment structure of such a society is becoming increasingly service-oriented. Most of the labor force is shifting toward general service sectors such as education, healthcare, science and technology, and finance. The demand for knowledge-based and high-skilled labor is rising rapidly, while the number of low-skilled jobs is steadily decreasing. At the same time, the risk of social polarization is increasing, as the income gap between high-paid knowledge workers and low-paid service workers continues to widen.
Meanwhile, there is also an unprecedented prosperity in financial markets. The global allocation of capital and knowledge has become inevitable. The flourishing of capital and securities markets has supported the rapid expansion of the service sector and enabled economies to generate profits worldwide through market valuation, bonds, investments, patents, and brands. As a result, the focus of economic competition has shifted comprehensively toward the financial markets.
Finally, government reform and institutional adaptation are essential. At the national level, beyond emphasizing and strengthening innovation policies and investment in education, governments need to use national strategies to support technological innovation and to establish lifelong learning systems. In addition, a reliable and well-developed social security system is necessary to address challenges such as aging population and changes in employment structure. In post-industrial countries, the improvement of legal and regulatory frameworks has become the primary means of government administration, and continuous reform of government institutions has become inevitable.
Based on the typical characteristics of post-industrial countries, we believe that China is moving away from the industrial era and is beginning to enter a post-industrial age, where the present moment marks a critical turning point.
There are four main reasons for this structural transition.
The first reason has its origin in nearly two decades of rapid real estate development, which has laid a solid foundation of wealth for China while also creating a prosperous service-oriented economic system. This system encompasses legal services, accounting, architectural design, urban planning and surveying, interior decoration, landscape design, intellectual property services, and a wide range of consumer goods. Although the boom and expansion of China's real estate sector are the reasons for certain problems, challenges, and serious aftereffects that the country is facing today, they have nonetheless provided the groundwork for China's post-industrial transformation.
The second reason lies in the large-scale emergence and expansion of debt and bond markets, which have become virtually unstoppable. China has effectively become a "bond-driven economy", with economic growth heavily dependent on debt issuance. Combined central and local government debt is estimated to fall within the range of 70% to 90% of GDP, depending on how implicit liabilities are calculated. Regarding hidden debt, local governments have accumulated obligations through financing vehicles and implicit guarantees, estimated at about RMB 60 trillion, roughly 47.6% of GDP.
The third reason is the unstoppable growth of government bond issuance. In 2025, China's central government plans to issue a total of RMB 1.3 trillion in ultra-long-term special treasury bonds, an increase of RMB 300 billion from the previous year. This type of bond issuance has essentially become long-term in nature and continues to expand. For local governments, the planned issuance of "special-purpose bonds" in 2025 amounts to RMB 4.4 trillion, which is RMB 500 billion higher than the previous year. Moreover, in just the first quarter of 2025, the total issuance of government bonds, including both central and local levels, reached around RMB 3.28 trillion, the highest quarterly issuance on record. By March 2025, the combined total of central and local government bonds had reached approximately RMB 9.788 trillion. Clearly, China's economy has become deeply intertwined with debt issuance, giving rise to what can be described as a "bond-driven economy", primarily sustained by continued development.
The fourth reason is that the peak period of China's domestic and international market expansion has already passed, leading to sluggish economic growth. Since 2012, the country's economic growth has been on a downward trajectory for more than a decade. As the total size of the economy has expanded beyond RMB 140 trillion, it is no longer realistic to rely on investment alone to stimulate further growth. In fact, even with an annual GDP growth rate of around 5%, China's economy has remained at roughly that level for the past five years.
Based on the analysis above, we believe that the Chinese economy already exhibits the typical characteristics of post-industrialization and has therefore entered a post-industrial era. From this understanding, we have constructed a model of China's economic growth in the post-industrial period, which indicates a trend of overall stability with moderate growth. In this model, a growth rate of 5% represents excellent performance, 4% very good, 3% normal, 2% poor, and 0–1% very poor.
According to this economic growth model, the era of rapid economic growth in China has long passed. China's economy will likely remain on a stable growth trajectory, around 3% to 4%, and this is expected to continue for a long period.
The view that China's economic growth can return to a period of rapid expansion is overly optimistic. Such a perspective also overlooks the fact that China's economy is currently at a critical turning point, transitioning from an industrial era to a post-industrial era. It is precisely because of habitual thinking that some maintain the familiar expectation of high-speed economic growth.
In this context, the considerations of the strategic plans for the 15th Five-Year Plan period belonged to approximately 90% of the current local governments in China are fundamentally flawed. A widespread error is the substantial overestimation of China's future economic growth. This indicates that significant mistakes exist from the very outset, both in basic forecasts and underlying assumptions. During the 15th Five-Year Plan period, and for an extended period thereafter, the most prudent course of action is to actively promote the development of productive finance, under the overarching condition of stable economic growth.
The development of China's capital market, particularly the securities market, has been highly unstable, where sharp rises are followed by equally swift declines. The market is riddled with loopholes, buried under a mountain of regulatory documents, where many things can be considered "non-compliant" or "illegal", which effectively stifles the market's natural efficiency. Frequent personnel changes in the regulatory bodies further add to the issue. As a result, the capital market has long been mired in stagnation.
By contrast, the capital market of the post-industrial United States, though never free of risk or major events, remains consistently vibrant. Market activity and development are not hindered, and the capital market's place in society is unshakable. Indices have stayed high for the long term. Despite the constant chorus of pessimists and the active short sellers, U.S. stock indexes continue to hit new highs. Indeed, the Dow Jones Industrial Average is now charging toward the 50,000-point mark.
Perhaps what holds greater relevance for China is the way the U.S. capital market functions as a form of social infrastructure, working in near-perfect coordination with national fiscal and monetary policies. In practice, the more liquidity is released, the higher the U.S. stock indices climb. The entire capital market has aligned seamlessly with the evolution of the "debt-driven economy", effectively making it a kind of "soft infrastructure".
Following the 2008–2009 Wall Street financial crisis, the first phase of quantitative easing (QE1) was launched. The Federal Reserve alone purchased roughly USD 1.725 trillion in bond assets, including U.S. Treasuries and mortgage-backed securities (MBS). As a result, the U.S. not only eased the liquidity crunch effectively through the capital market, but the S&P 500 Index (SPY) also rebounded sharply, rising from its March 2009 low of around 676 points to approximately 1,150 points by March 2010, a gain of more than 70%.
During the second phase, QE2, the Fed purchased an additional USD 600 billion in long-term Treasury securities, and the stock market continued its upward momentum. Then came QE3, when it moved to an open-ended asset purchase program, essentially becoming the market's largest market-maker, through buying USD 40 billion in MBS and USD 45 billion in Treasuries each month. During this period, the S&P 500 climbed steadily from around 1,430 points to nearly 2,000 points by October 2014, an increase of about 40%. In the fourth phase, QE4, and especially during the COVID-19 pandemic, the Fed launched an unlimited quantitative easing program, purchasing both Treasuries and corporate bonds. The S&P 500 rebounded sharply from its March 2020 low of 2,237 points, reaching nearly 3,800 points by the end of the year, a surge of around 70%. Since then, U.S. equities have continued their ascent. As of 2025, the S&P 500 has surged toward 6,500 points, repeatedly setting new all-time highs.
Therefore, we have emphasized that during the period of China's 15th Five-Year Plan, the development of the capital market should be a key priority for the country. It represents one of the most important forms of social infrastructure for China's future economy, a crucial foundation that responds directly to both current and future economic realities. The weaknesses in this area must be addressed effectively.
The key question, however, is how to coordinate efforts across the national, societal, and local government levels to advance the construction of this "soft infrastructure". ANBOUND's recommendation is clear: promote and develop "productive finance".
The concept of productive services is already well understood, and "productive finance" is in fact an extension and evolution of that idea. It refers to financial models that, through the use of financial instruments and resource allocation, directly or indirectly support real economic activity. The various innovative models within productive finance are all designed to promote and drive economic growth, employment, technological advancement, and improvements in total factor productivity (TFP), with a particular focus on value creation, rather than the mere pursuit of short-term financial gains or speculative returns.
A previous report by the Institute of World Economics and Politics at the Chinese Academy of Social Sciences (CASS) also discussed the concept of productive finance, emphasizing the financing–investment–repayment cycle within production activities at the micro level. However, from a policy prescription perspective, the author believes that productive finance should place greater emphasis on the overall vitality and value realization of the real economy. In other words, productive finance should take as its overarching goal the support of the real economy and technological development, vigorously advancing the construction of the capital market, enriching financial instruments, stimulating economic dynamism, mitigating and hedging risks, and stabilizing or enhancing economic growth.
As China undergoes economic transformation, both bonds and debt levels have repeatedly reached new highs, which are likely to continue rising in the future. This signifies that, for the country, there is a potential shift toward a fully "debt-driven economy". Under such circumstances, it is no longer feasible to rely solely on conventional or administrative measures to offset debt, nor to expect "debt reduction through more debt". Instead, China will need to increasingly depend on the financial markets, leveraging a vibrant and well-developed capital market and diverse financial instruments, to manage and refinance debt through bond issuance and market-based mechanisms. In this regard, the national capital market, local governments, and large state-owned enterprises all have a role to play. By vigorously developing and promoting productive finance, China can help shape a constructive and resilient financial system, capable of smoothing financial fluctuations, mitigating default risks, and reducing the likelihood of debt crises or large-scale defaults.
As it stands, productive finance is ultimately a macro-level systemic integration, an engine of economic growth and a key lever capable of stimulating and sustaining long-term development.
One pressing question in this context is concerning the reform of China's state-owned enterprises (SOEs). Our recommendation is that SOEs should shift away from managing specific projects and instead transform into productive financial groups, focusing on the preservation and appreciation of state-owned assets. Through investment and capital operations, they should play a leading role in advancing real economic activity and technological development. This represents an important and pragmatic direction for reform.
As for private enterprises, the key question is how to effectively "go global." The answer lies in promoting the development of a "business consortium economy", an approach that provides stronger organizational services and political support for private sector expansion abroad. Local governments can play a pivotal role by establishing productive financial groups to create capital linkages, organize and manage various business consortia, and provide cross-border support and services for Chinese enterprises, both state-owned and private, seeking to expand internationally.
How can cooperation among different market players be achieved, considering SOEs are frequently thought to enjoy more benefits than the private ones? The solution once again lies in productive finance. By using productive finance as the core axis of resource allocation, China can break down the divide between state-owned and private sectors, dissolve their adversarial relationship, and instead unite their strengths to build a prosperous, integrated national market.
What impact does productive finance have on urban vitality? The answer is that productive finance itself is a vital component of the broader financial industry. Therefore, its robust development can attract and mobilize vast resources, turning urban renewal into a sustainable and dynamic process. When finance thrives, so does the economy; the prosperity of the financial sector has always driven economic prosperity, a fundamental principle observed throughout economic history.
Therefore, the development and promotion of productive finance should be regarded as a major strategic policy initiative, one whose significance is no less important than the Belt and Road Initiative (BRI) itself.
It is important to recognize that productive finance represents a social and systemic form of development, much like Wall Street functions as a social and institutional system within the U.S. This type of societal system should not be confused with ordinary financial activities. Rather, productive finance constitutes a strategic policy framework and a key national asset in the post-industrial era. Without a prosperous, advanced, and continuously expanding financial market system, post-industrialization cannot truly be achieved. Hence, productive finance must be viewed as a macro-level systemic undertaking, a concept and mission aimed at purposefully building a series of securities markets, related institutions, and supporting services. Its ultimate goal is to revitalize the economy and to build a "Chinese Wall Street" system.
Looking at China's economic policy during the 15th Five-Year Plan and beyond, promoting and advancing productive finance will be a critical macro-level policy lever. But where is China's Wall Street? This question goes far beyond the construction of a few stock exchanges—it concerns the development of a comprehensive social financial services system and legal-regulatory framework. In essence, it is a matter of building a key component of soft infrastructure. This is a major macroeconomic development task, one that is crucial for seizing current and future strategic opportunities, and to a significant extent, will determine China's ability to achieve its century-long economic goals and successfully navigate the path to post-industrial development.
