In this photo released on July 18 by the Xinhua News Agency, members of the Politburo Standing Committee attend the third plenary session of the 20th Communist Party of China Central Committee, in Beijing.Xie Huanchi/The Associated Press
In December, 1978, China’s leaders held one of the most pivotal meetings in the ruling Communist Party’s history. Known as the Third Plenum, the summit confirmed the rise of Deng Xiaoping as paramount leader and began the process of “reform and opening,” which led to China’s economic boom.
This week, expectations were great as current paramount leader Xi Jinping gathered his top deputies for another Third Plenum. China’s economy is stuttering, dragged down by a collapsing real estate sector and anemic domestic demand. Second-quarter GDP figures released this week showed lower-than-expected growth, 4.7 per cent, leading many to wonder if the country can hit its already modest annual target – modest for China, that is – of 5 per cent.
Speaking to reporters Friday, Han Wenxiu, the senior Communist Party official for economic affairs, said the current recovery is not proving strong enough and macro policies need to be implemented more effectively. The country’s modernization efforts have been facing “many complex conflicts and problems, and we must overcome multiple difficulties and obstructions,” his colleague Tang Fangyu added.
A communiqué released after the plenum pledged to “further deepen reform comprehensively” but offered few details. Indeed, most analysts said the party seemed determined to stay the course set out by Mr. Xi: a focus on high-tech development and national security, while bearing the pain of a transition away from reliance on the property sector and local government infrastructure spending.
Trivium China, a Beijing-based consultancy, described the communiqué as a “bit of a damp squib,” with “no major surprises or indications of any earth-shattering reforms.”
In a note, it highlighted the communiqué's mention of this year’s growth target – rare for such documents, which focus on medium- and long-term planning – as evidence “the leadership is clearly worried about the still struggling economy.”
Tianchen Xu, a senior China analyst at the Economist Intelligence Unit, said more details about practical reforms could be disclosed in the coming days.
“That said, the outcome is in line with our expectations that the Third Plenum is a continuation of existing policy tweaks – there’s nothing hinting at China heading toward a different policy direction,” he added.
The Chinese economy has struggled to recover since the pandemic, when the country was closed off from much of the rest of the world and many cities subject to stringent lockdowns, disrupting supply chains and devastating smaller businesses. A continuing property crisis, which multiple interventions have failed to steady, has driven down already limited domestic demand and contributed to a rapidly rising unemployment rate.
“Xi controls many aspects of life in China, but he cannot force the Chinese people to spend,” said Craig Singleton, senior China fellow at the Foundation for Defense of Democracies, a Washington think tank. “The public’s hesitance to open their wallets is a vote of no confidence in Xi’s economic management, signalling deep-seated doubts about the future.”
Many of Mr. Xi’s policies have focused on what the party terms “new quality productive forces” – mostly high-tech products such as semi-conductors and China’s booming electric-vehicle sector. But EV exports are facing new tariffs in the United States and Europe amid complaints about unfair subsidies to Chinese manufactures and a growing protectionist shift across the West. The U.S. has also sought to limit Beijing’s access to cutting-edge chip technology.
With the Republican National Convention also being held this week, Communist Party officials attending the Third Plenum would have been aware of the risk of even more stringent anti-China policies should Donald Trump win a second term in November. In accepting his party’s nomination, Mr. Trump hailed his aggressive negotiations with China on trade, while his running mate, J.D. Vance, earlier promised to “stop the Chinese Communist Party from building their middle class on the backs of American citizens.”
The Third Plenum communiqué noted growing “external risks and challenges,” adding that Beijing should “strive to play a leading role in global governance” in order to “foster a favourable external environment.”
With reports from Reuters and Alexandra Li in Beijing.