A debut of the term ‘financial powerhouse’ in China’s new five-year plan will push the financial system to the front lines of industrial transformation
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China’s 15th Five-Year Plan is not just another five-year roadmap, but instead represents a critical starting point toward achieving basic modernization by 2035. Against a backdrop of rising geopolitical tensions, intensifying technology competition and a slowing domestic economy, policy priorities are shifting from stabilizing growth to reshaping the development model. Stock markets in Shanghai, Shenzhen and Hong Kong have all rebounded over the last year, with authorities repeatedly signaling support for market stability. Investors, however, are increasingly focused on what role the financial system will play in the latest transition.
China’s “Recommendations for the 15th Five-Year Plan,” released late last year, included the goal of building a “financial powerhouse” for the first time. The document also called for increasing the share of direct financing, strengthening the multi-tier capital market system, and developing technology and digital finance. This echoes President Xi Jinping’s repeated calls for finance to serve the real economy and avoid drifting away from productive activities, signaling a shift from a system characterized by short-term policy adjustments toward a broader restructuring of the financial system itself.
In fact, “financial support for the real economy” is nothing new in China. It has been repeatedly stressed since the Central Financial Work Conference in 2017, mainly through tools such as reserve requirement cuts, relending programs and targeted credit to stabilize growth and contain risks. Yet the overall financial structure has never undergone a fundamental change.
Tian Xuan, vice dean of Tsinghua University’s PBC School of Finance, noted that as of June 2025, direct financing accounted for only about 31.1% of China’s total social financing, while bank assets still represented more than 90% of the financial system’s total assets. In some regions, the market-based fundraising share of government-guided funds is even below 20%.
In his view, this shows that China remains a highly credit-driven financial system, with limited capacity for markets to truly bear risk and price innovation.
The power of markets
As AI, semiconductors, advanced equipment and new materials become policy priorities, capital needs are clearly changing. In the 15th Five-Year Plan recommendations, references to “technology,” “innovation” and “new quality productive forces” appear frequently, alongside the launch of an “AI+” initiative. This places technological upgrading at the core of national strategy and shifts finance from simply supplying funds to building capital mechanisms for long-cycle innovation, signaling that market mechanisms and regulatory frameworks will take on greater importance, rather than relying solely on administrative guidance.
So, what changes may lie ahead?
First, with increasing the share of direct financing now an explicit policy direction, new capital is more likely to flow into the real economy through the equity and bond markets. This should improve the equity financing environment and allow capital markets to play a more central role in economic transformation.
Next comes a shift in valuation logic. As “patient capital” and improved venture investment and M&A mechanisms move onto the policy agenda, markets may place greater emphasis on technological barriers and scaling capabilities when assessing companies. Short-term profits will no longer be the sole benchmark, while industry positioning and alignment with policy priorities will increasingly become positive factors. These changes may not immediately show up in share prices, but they are likely to shape medium- and long-term capital allocation.
At the same time, refinancing and secondary share offerings may gradually become the norm. Equity markets are being tasked with funding industrial upgrading, and rights issues and private placements with clearly defined investment purposes are expected to receive greater regulatory support.
For investors, markets may increasingly accept a model in which companies grow while raising capital, with evaluation shifting from short-term earnings per share to whether fundraising aligns with broader industry priorities.
On the bond side, demand from technology firms for convertible bonds and corporate credit is expected to rise, while sectors tied to new quality productive forces may benefit from cheap financing. Credit pricing is likely to become increasingly linked to industry characteristics, rather than relying solely on financial leverage.
What bears watching is that as technology and new quality productive forces move to the center of policy priorities, financial markets in Shanghai, Shenzhen and Hong Kong are likely to become more accommodating toward hard-tech companies, including those not yet profitable but with technological moats and commercialization potential. Listing standards may not be broadly loosened, but approval signals could become clearer for sectors such as AI, advanced equipment, semiconductor tools and new materials.
Regulatory changes also warrant close attention
The 15th Five-Year Plan recommendations also call for “comprehensively strengthening financial regulation,” meaning that as capital markets expand, requirements for disclosure, use of funds and internal controls are likely to tighten in parallel. Going forward, how listed companies use the capital they raise may matter more than whether they can raise it, helping curb past practices where some firms strayed from their core businesses or left funds idle or diverted them into non-productive areas.
Financial regulators have also repeatedly stated that industrial M&A should serve as a key tool for improving the efficiency of direct financing and driving structural adjustment, encouraging listed companies to pursue consolidation around their core businesses. Behind this push lies the reality of difficult venture capital exits and fractured financing chains for technology firms.
Against this backdrop, developing “patient capital” and improving M&A restructuring mechanisms are seen as two sides of the same institutional framework — the former supplying long-term funding, and the latter opening exit channels. If supporting measures are implemented, capital may move beyond venture investment and IPOs to form a fuller cycle to support venture funding, public listing, expansion through refinancing, and exit via consolidation.
Still, becoming a financial powerhouse is no cure-all. Investment, consumption and exports remain under pressure, and IMF Managing Director Kristalina Georgieva has noted that China needs to accelerate its shift toward domestic demand and consumption, underscoring that financial reform must be coordinated with industrial and demand-side policies.
From a broader perspective, the drive toward becoming a “financial powerhouse” represents a long-term effort to realign the financial system with China’s industrial structure, with capital markets set to take on an expanded role in the process.
This is part 4 in a 5 part series. To read previous parts, click on the links below:
15th Five-Year Plan: Solar and property wait for the next policy tide
15th Five-Year Plan: Opportunities and trade-offs under technological self-reliance
The 15th Five-Year Plan: Who is leading offshore listings?
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Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.
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