Will the upcoming third plenum of the CCP’s 18th Central Committee yield any significant reforms? As China’s top leaders flock to Beijing later this week, Forbes’ Kenneth Rapoza looks ahead at some of the key issues:
This year, China watchers are waiting to hear word on new rules for the banking and financial sectors, fiscal and tax system reform, land use rights, and social inequality to name a few. Foreign and domestic observers will be watching closely to see what reforms actually occur in these areas, how substantive they may be when laid out, and what they may signal about the status—and outcomes—of the internal tug of war in Beijing.
“Several major reforms are coming through this Plenum and they should have a direct impact on the market as China transitions to a more open economy,” said Lin Li, China Strategist at Deutsche Bank. Put her in the optimist camp. ”The number one reform will be deregulation which will allow more private capital into industry that is dominated by stated owned companies,” she said. [Source]
The meeting will mark the first real chance for Chinese President Xi Jinping to unveil his economic vision for the country. For the University of Nottingham’s China Institute Blog, Linda Yueh writes that the session will look to the so-called ‘383 Plan’ produced by Chinese government think tanks as it charts the future of the economy:
The 383 plan involves 3 reforms to open up the market, transform government, and reform enterprises to boost innovation.
The 8 key areas to tackle include: cut administrative approvals, promote competition, land reform, open up banking including liberalising interest rates and the exchange rate, reform the fiscal system including setting up basic social security, reform state-owned enterprises, promote innovation including green technology, and open up the services sector.
Within these, the plan identifies 3 major breakthroughs to be achieved: lower market barriers to attract investors and boost competition, set up a basic social security package, and allow collectively-owned land to be traded.
This is a tall order, but these three aims figure prominently among the reforms that are needed for China to grow in a more sustainable and stable fashion. [Source]
Despite high expectations, doubt persists. Rapoza adds that some, including economist Patrick Chovanec, think the plenum will fall short of expectations. Similarly, Cheng Li and Ryan McElveen at The Brookings Institution relay three reasons why scholars inside and outside of China are pessimistic. Xi has left both liberals and conservatives disappointed, according to the South China Morning Post:
Liberals hoped that Xi would herald in a new era of political liberation following two decades of change focused almost entirely on economic development. They based those hopes on Xi’s parentage. His father, Xi Zhongxun, a party chief who emerged from years of purges to liberalise the economy in the coastal provinces, helped China become an economic superpower in three decades.
Conservatives believed that Xi – the princeling son of a revolutionary leader, born into the party’s aristocracy – would revive some socialist principles to atone for the wrongs committed in the name of capitalist development.
A year later hopes on each side have withered, if not entirely vanished. Liberals and conservatives have become increasingly critical of their new leader. Xi’s string of high-profile decisions over the past year has raised more questions than answers about his governing philosophy. [Source]
Bloomberg News reports that Xi, for his part, has employed criticism sessions to consolidate power and reduce the risk of political instability within the CCP leadership if he rolls out reforms:
“Every party member, every division chief, each department head and the ministers have to go through it,” said 31-year-old Tang, who participated in the September gathering and asked to withhold his full name and work unit because he isn’t authorized to talk to reporters. “There are clear instructions that criticism must be genuine. For instance, you can’t say ‘Oh, you have worked too hard and should take more breaks.’”
The purpose of such meetings being held across China — at least one of which was attended by party chief and Chinese President Xi Jinping — is to reinforce adherence to the official line and strengthen the position of the nation’s new leaders in the minds of China’s 85 million Communists, according to Sidney Rittenberg, 92, a party member from 1946 to 1980 who was Mao’s translator.
“The current leadership wants everything under control and no surprises, no indirect challenges, before the plenum,” said Ding Xueliang, a professor of social science at the Hong Kong University of Science and Technology.
The campaign may be having the desired effect on a 31-year-old bureaucrat surnamed Wang, who works at a government ministry in Beijing. He said he didn’t know what to say in the 90-minute sessions he attended before seeing television footage of the Hebei meeting where Xi spoke. [Source]
See also a piece by ChinaFile contributor Barry Naughton of the University of California, San Diego, on the third plenum and why you should care.