China to pour more money into science and tech at Two Sessions, officials say

China will step up spending on strategic scientific and technological sectors in 2026, officials announced at this year’s Two Sessions. The move puts a premium on self-reliance. Short-term pain for long-term gain? That is the calculus Beijing appears to be betting on as it earmarks more fiscal resources for chips, aerospace, biomedicine and artificial intelligence while trimming other internal expenses.

What was announced

Finance Minister Lan Fo’an said national outlays on science and technology are set to reach nearly 1.3 trillion yuan in 2026, reportedly a 7.1% rise from 2025, as the economy prepares for a projected expansion of more than 6 trillion yuan this year. Officials outlined six emerging “pillar” industries — integrated circuits, aerospace, biomedicine, the low-altitude economy, new energy storage, and intelligent robotics — that together generated roughly 6 trillion yuan in 2025 and are projected to grow to 10 trillion yuan by 2030; China’s AI industry is also expected to reach about 10 trillion yuan over the same period, it has been reported. Social spending will not be ignored: education, social security, employment, health care and housing security expenditures are expected to exceed 12.4 trillion yuan in 2026, and authorities plan to renovate about 2,000 public elder-care institutions and boost elder-care bed capacity by more than 73% in five years.

Fiscal trade-offs and broader context

To free up funds for these priorities Beijing has cut “three public expenses” (official overseas trips, receptions and government vehicles) by more than 7% and reduced meetings and training outlays by 10%; 20 provinces have trimmed over 12 billion yuan from local budgets. At the same time the People’s Bank of China has injected roughly 2 trillion yuan in medium- and long-term liquidity since the start of 2026 and China’s A-share market has topped 110 trillion yuan in market capitalization. Commerce Minister Wang Wentao highlighted the scale of China’s consumer market — the world’s second largest by nominal measures and the largest by purchasing power parity — and said visa-free policies and expanded imports of medical services will be used to boost inbound tourism and meet changing domestic demand.

Why now? Analysts point to a mix of economic rebalancing and geopolitical pressure. With Western export controls and sanctions targeting advanced semiconductors, AI chips and other high-end technologies, Beijing’s increased funding for integrated circuits and AI aims to accelerate domestic capabilities and reduce dependence on foreign suppliers. Whether state-directed investment can deliver rapid technological catch-up — and do so without exacerbating local debt risks — remains the central question as China retools its economic priorities.