China's Third Plenum to Expose Country's Contradictions

The CPC Central Committee is the main decision-making body of the Chinese Communist Party. It includes 205 members and 171 alternate members, including Xi himself. It generally meets once a year in plenary sessions, or plenums. Historically, the third plenary sessions have played a crucial role in guiding major economic and political reforms. The Third Plenum held in 1978 marked the beginning of China's reform and opening-up policy under Deng Xiaoping, setting the country on the path of economic transformation.

This plenum is being held later than planned after an unexplained delay last fall, and expectations are high. A Chinese academic who advises the government describes the plenum as the most important meeting in the next five years. It will define the economic strategy and the reform program.

According to China's official Xinhua News Agency, this year's third plenum will mainly examine issues related to the overall deepening of reform and the advancement of Chinese modernization. The cryptic wording may be difficult to understand even for Chinese citizens. Therefore, government advisers involved in drafting the document are often invited by state television, CCTV, to explain key points to the public after the event. Government agencies and educational institutions also hold study sessions to learn key takeaways from the meeting.

The upcoming plenum is expected to address pressing economic challenges, particularly those arising from the slowdown in the real estate sector and the need for sustainable growth. Real estate investment in China has plummeted 9% year-on-year during the first two months of 2024, a sign of a marked slowdown. The real estate sector has been a significant driver of economic growth in China, so its performance is closely watched as an indicator of the overall health of the economy.

Despite a better than expected performance 5.3% growth in gross domestic product in the first quarter of 2024, the International Monetary Fund suggests that China's economic rebound could be protracted, stretching over several years and turning into a medium-term slowdown.

At the same time, President Xi's leadership has introduced a new dimension to China's economic challenges. Its focus on national security and skepticism of market forces have led to a complex interplay between political will and economic imperatives. The private sector is traditionally a cradle of innovation and economic vitality. The government's preference for strengthening state-owned enterprises at the expense of the private sector demonstrates a decisive policy stance aimed at curbing the country's entrepreneurial spirit. This could limit the private sector's ability to innovate and compete globally.

Some researchers from both China And United States Analysts say China's economic situation is not as dire as many think. In May, the Chinese government announced several measures aimed at stabilizing the real estate sector, including plans to local governments buy back unsold houses struggling developers and a 0.25 percentage point reduction in interest rates for homeownership loans by the People's Bank of China. It remains to be seen whether these measures will be effective.

Scepticism has greeted Premier Li Qiang's recent promises to strengthen the private sector. promised at the opening of the National People's Congress in March to safeguard the status of foreign and private companies. However, these promises are seen more as a strategy to attract foreign investment and quell social unrest than as genuine economic liberalization.

The upcoming third plenum is of great importance in determining whether the Chinese government will keep its promises. However, concerns remain. The government's record in implementing promised reforms has been inconsistent and the timing of economic rescue packages has often been suboptimal.

For example, the Third Plenum in 2013 under Xi Jinping committed to allow markets to play a decisive role in the allocation of resources within the economy. And yet, there has been a renewed emphasis on the role of public enterprises since 2017, while large private tech companies such as Alibaba and Tencent have faced repressive measures.

Furthermore, even if the third plenums are an opportunity to introduce important reforms, they are not all promising from a Western point of view. For example, in 2018, Xi Jinping removed China's presidential term limits, allowing him to potentially stay in power indefinitely.

It is also notable that Xi consciously compares the upcoming reforms to those of the Third Plenum in 2013, emphasizing their importance and scale. declared in May that this year will be crucial for deepening reforms, continuing the process started during the Third Plenum of the XVIII Central Committee. It is important to emphasize that Xi organically combines the two plenums this year and the one he chaired in 2013. In other words, Xi views this year's third plenum as a continuation of the 2013 one.

While the 2013 Third Plenum document advocates giving the market a greater role, it simultaneously stresses the need to maintain the primacy of state ownership and preserve the central position of public sectors within the economy, indicating that the state will maintain substantial control over the market economy. Although it outlines some political reforms, such as promoting consultative democracy, the decision reaffirms the leadership of the CCP, suggesting the continuation of one-party rule without major changes to the political system. The document repeatedly emphasizes the importance of the CCP leadership, indicating the intention to centralize and strengthen the Party's control over all aspects of society, including the economic, political, and cultural systems. This suggests caution and premature optimism about hopes for economic reform measures at the upcoming Third Plenum.

The declared objective of the next plenums is to further deepen the reform. Xi clarified the meaning of this idea in May during a symposium with academic experts. It should focus on the theme of promoting modernization with Chinese characteristics, he said. said. The term modernization with Chinese characteristics contrasts with Western-style development, emphasizing the strengths of the Chinese economic and political model under the leadership of the CCP. It aims to offer an alternative Marxist-socialist path to modernization, distinct from Western models, with an emphasis on common prosperity.

At the symposium, Xi Jinping stressed the primacy of the leadership of the Communist Party of China and its adherence to Marxism. He also expressed optimism: “At the same time, we must dare to innovate, thoroughly and correctly reform what must and can be reformed, and resolutely grasp what we have identified as necessary. Xi Jinping’s challenge is to skillfully implement a balanced strategy that both promotes economic vitality and adheres to the core ideological commitments of communism.”

Recently, a delegation of Chinese government officials and economic advisers visiting the United States tried to reassure American investors that major economic reform would be announced at the upcoming plenum. The visit was seen as part of China’s broader public diplomacy efforts to woo the American public and counter Commerce Secretary Gina Raimondo’s characterization of China as a global economic power. non-investable place. Deputy Secretary of State Kurt Campbell note that China's efforts to revive its faltering economy are preventing it from picking a fight with the United States

However, these efforts to project a pro-reform image and boost investor confidence will inevitably be counterbalanced by President Xi's unwavering efforts to discipline Marxist socialism and by the Communist Party's strengthening control over the economy, politics and Chinese society. Significant reform measures will be announced. But don't forget that we are a socialist country, a Chinese government official told the author.

Chinese observers will carefully read the announcements from the third plenum, especially regarding new policies to destock real estate stocks, especially in lower-tier cities, and accelerate the issuance of local government bonds to stimulate investment in infrastructure and ease local tensions. debt levels. Create a level playing field for the struggling private sector and remove institutional barriers, while reassuring foreigners that China is A safe place visiting and doing business, will be very relevant for foreign investors.

The stakes are high and the outcome will have far-reaching consequences not only for China but for the global economy as a whole.

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