Chinese Communist Party officials are gathering in Beijing from Monday to Thursday for the third plenary session of the 20th Central Committee, also known as the Third Plenum.
China’s state-run Global Times wrote that they are watching to see how the meeting will “set priorities for comprehensively deepening reform, draw up a blueprint for long-term economic development and open a new chapter in the country’s march towards Chinese modernisation”.
The meeting comes at a critical time for China’s economy, with policymakers grappling with an ongoing property crisis and sluggish domestic demand, as well as trade barriers and geopolitical threats from the West. On Monday, China released gross domestic product data for the second quarter, with growth coming in below forecasts at 4.7 per cent.
What is the Third Plenum?
The Central Committee of the Communist Party, comprising around 200 senior members and headed by President Xi Jinping, is a key decision-making body in China’s political system. It holds a total of seven plenary sessions, or plenums, in Beijing during its five-year term. The meetings produce documents that shape the country’s policies for years to come. The current Central Committee was elected in 2022.
The Third Plenum is closely watched because of its historic influence on economic policy. It was here that Deng Xiaoping announced his historic “reform and opening up” initiative in 1978. In 1993, the plenum endorsed the socialist concept of a market economy.
What is the procedure?
After discussions at the meeting, a statement is voted on and usually adopted on the day the meeting ends, and a full document detailing the decisions is usually published a few days later. A draft of the document was unveiled by the Politburo, the party’s top leadership body, state media reported in June. The title of the draft gave a hint of what was to come: “Deepening reform more comprehensively and pushing forward Chinese-style modernisation”.
The main topic of the meeting
There was no official announcement about the timing of the session. Observers had expected the third plenary session to be held last autumn. Instead, state media reported in April that it would be held in July. This led to speculation that the meeting had been postponed to allow time for basic policy decisions to be made.
The previous third plenum in 2018 focused on reforming party and state institutions rather than the economy, but this week’s meeting is expected to focus on the economy.
“This is the first third plenum in 11 years whose main theme is economic reform,” said Hiroya Yamauchi, a China and Asian markets expert at Nikko Asset Management in Tokyo.
At a meeting of the Political Bureau of the CPC Central Committee chaired by Xi Jinping, general secretary of the CPC Central Committee, in June, it was noted that the upcoming plenum will mainly focus on issues related to deepening reform more comprehensively and pushing forward China’s modernisation, according to Chinese state agency Xinhua.
Next year the government is due to update its five-year economic plan, and the meeting is also important in the context of these plans.
The economic plenums are also seen as an opportunity to explain China’s strategic goals to the world.
A key priority for Xi Jinping is to achieve scientific and technological self-sufficiency. China has made great strides in areas such as electric vehicles and batteries, and is investing heavily in building its own semiconductor supply chain. Xi has often called for the development of “new quality productive forces” at meetings, and this is expected to be on the agenda of the communique.
The meeting is also seen as an opportunity to restore economic confidence among businesses and investors. Although the economy grew by 5.3% in the first quarter, consumer demand has yet to recover from the economic impact of the COVID-19 pandemic.
China’s consumer confidence index fell from over 120 in February 2022 to 86.7 in April that year, and has remained below the pessimistic threshold of 100 ever since.
“External pressure is increasing … and it is necessary to realise that Western developed countries will continue the policy of protectionism, destruction of production chains and creation of technological barriers [targeting China] for decades to come,” Alexander Lomanov, deputy director of scientific studies at the Primakov National Research Institute of World Economy and International Relations of the Russian Academy of Sciences, told the Global Times.
Lomanov added that it was therefore important for the Third Plenum to draw up a high-level blueprint for the country’s economic course and updated reform priorities. Lomanov also suggested that China should speed up reform and opening-up measures to overcome numerous challenges, such as redoubling efforts to open up to the outside world and expanding the circle of new partners.
What do companies and investors expect?
Some are hoping for major stimulus measures to boost domestic consumption. Of particular concern is the property sector, where the decline in new and existing home prices accelerated in May despite measures such as incentives for state-owned enterprises to buy unsold homes.
There is no official indication that this issue will be addressed at the Third Plenum. A related issue that economists say may come to the fore is tax reform. For example, allocating more tax revenue to local governments, which have traditionally relied heavily on land sales, could help contain the property crisis.
On the other hand, experts believe that the third plenary session will focus on longer-term policies.
Political observers are also watching the reshuffle. Former foreign minister Qin Gang and former defence minister Li Shangfu were removed from their posts last year as part of an investigation. Li was formally expelled from the party in June for taking bribes, while Qin is still a member of the Central Committee. However, everyone agrees that the meeting will focus on the economy in general.
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