China on Thursday pledged to accelerate investment in high-tech industries and scientific innovation, framing technological advancement as vital to national security and economic self-reliance amid intensifying competition with the United States.

At the opening of the annual parliamentary session, Premier Li Qiang praised China’s resilience in the face of tariff hikes imposed by U.S. President Donald Trump. However, he warned that “multilateralism and free trade are under severe threat,” announcing a 7% increase in both the defence budget and research and development spending.

Li acknowledged “acute” structural imbalances in the economy, including strong supply but weak domestic demand, subdued market expectations, a prolonged property sector slump and mounting local government debt.

Beijing has set a slightly lower growth target of 4.5%–5% for the year, compared with last year’s 5% goal, which was largely achieved through a surge in exports that pushed the trade surplus to a record $1.2 trillion.

China’s 15th Five-Year Plan emphasizes innovation, industrial upgrading and a “notable” increase in household consumption’s share of GDP — though no specific target was provided. The plan also aims to raise the value-added contribution of core digital economy industries to 12.5% of GDP and introduce policies for a unified national data market and AI security risk prevention.

The strategy reflects President Xi Jinping’s vision of developing “new productive forces” to avoid the middle-income trap, counter demographic decline and reduce vulnerability to U.S. export controls.

Despite references to boosting consumption, analysts say Beijing remains heavily focused on high-tech investment as the main growth driver. China invests roughly 20 percentage points of GDP more than the global average, while household consumption lags by a similar margin — a state-driven model that has contributed to industrial overcapacity and global trade tensions.

“China’s government remains laser-focused on spurring technological breakthroughs and high-tech investment,” said Fred Neumann, chief Asia economist at HSBC, noting that competition with the United States is a key motivation.

The government pledged support for “breakthrough” developments in areas ranging from agricultural seeds and biomedicine to frontier technologies such as machine-brain interfaces. State-owned enterprises were encouraged to generate demand for domestically produced semiconductors and drones.

Although China already accounts for 85% of the world’s electric vehicle charging stations, it aims to double their number within three years. In artificial intelligence, Beijing plans to develop “hyper-scale” computing clusters powered by abundant, low-cost electricity.

Analysts describe Beijing’s approach as a “controlled glide” toward slower but more sustainable growth. The lower growth target may allow policymakers to tackle industrial overcapacity, even if that results in factory closures and short-term job losses.

“The bigger context here is the China-U.S. competition, but this year is the trade truce,” said Dan Wang of Eurasia Group, suggesting Beijing may use the current window to push structural reforms.

China’s stimulus plans remain steady. The government targets a budget deficit of 4.0% of GDP and has maintained special debt issuance quotas at 1.3 trillion yuan for the central government and 4.4 trillion yuan for local authorities — unchanged from last year.

Modest social support measures include raising minimum monthly pensions by 20 yuan per person and increasing rural medical insurance subsidies by 24 yuan. Beijing also signaled greater spending on education, childcare subsidies and public hospital reform to address demographic challenges.

However, some analysts cautioned that the growth outlook may not fully reflect geopolitical risks, including tensions in the Middle East that could affect key trade routes.

As global competition over advanced technologies intensifies, Beijing appears determined to anchor its next phase of development on innovation — even as economic imbalances deepen at home.