What is happening?
On Monday, July 15th, the Chinese Communist Party (CCP) launched the Third Plenum of its 20th Central Committee. This year’s Third Plenum began at a time when the PRC is experiencing the slowest quarterly economic growth since the beginning of 2023, primarily due to a continued decline in the real estate sector, trade disputes with the United States and Europe, and weak consumer demand driven by cautious spending habits of a population concerned about economic stability. Observers commented that the Third Plenum failed to usher in economic help. The final communique demonstrated that economic recovery is only secondary to political work, including “strengthening full and rigorous Party self-governance” and “advancing work related to Hong Kong, Macao, and Taiwan.” As aptly described by Ming Chu-cheng (明居正), professor emeritus of political science at National Taiwan University in China, “Politics is choking the economy.”
What is the broader picture?
Chinese media often describe the Third Plenum as a milestone in the PRC’s development. Historically, decisions made during the third plenary sessions have significantly impacted the subsequent structure and functioning of the PRC as they sought to address various socio-economic challenges China had encountered in previous years.
For example, at the December 1978 session, Deng Xiaoping (鄧小平) initiated economic reforms that resulted in unprecedented economic growth and lifted more than 800 million people out of extreme poverty, achieving the largest global reduction of poverty in modern history. Another notable session was held in February 2018, which called on the party to unite closely around the Central Committee led by Xi Jinping (習近平) and proposed abolishing the constitutional clause limiting the presidential tenure to two terms.
The main challenges that the CCP was expected to address at this year’s Third Plenum included sluggish economic growth, wage stagnation, relatively high unemployment rates, particularly among the youth, local government debts, and unequal economic conditions between the private and public sectors. According to official statements, however, there are few signs of any significant changes in the PRC’s economic strategy. Instead, the discussions focused primarily on technological growth and maintaining the Communist Party’s political control over all areas of public life. Regarding economic development, the communiqué reiterated China’s commitment to “a new development philosophy” focusing on innovation and high-value-added production, shifting away from an economic model based on mass production of cheap goods driven by non-sustainable infrastructure investments. There is also some emphasis on education, support for science, and technological development as strategic assets necessary for modernizing the country and for geopolitical competition with the United States and Europe.
The session’s outcomes also suggest that the CCP will “lift restrictions on the free market while ensuring effective regulation.” However, given the current party leadership, the latter is likely to prevail over the former. The session also addressed unequal economic competition between state-owned and private enterprises, with state-owned enterprises often having better access to loans, subsidies, and legal protection. It is, however, well known that the CCP, under its current leadership, favors state-owned enterprises, and private entrepreneurs in China are actually well aware of this reality. The plenary session also seemed to dedicate only a little attention to addressing significant issues in the real estate market and local governments’ debts, with the communiqué’s content emphasizing general phrases about progress and stability.
It is essential to note that in the CCP lexicon, the term stability often translates to absolute party control over all aspects of public life, including the economy, where stability usually takes precedence over progress. In other words, political control and maintaining power are prioritized over socio-economic development and reducing wealth inequality between rural and urban areas. In this context, former Foreign Ministers Qin Gang (秦剛) and Li Shangfu (李尚福) were also dismissed from the Central Committee during Thursday’s session. Thus, at least through media propaganda, Xi Jinping is currently keen to be seen as the successor to Deng Xiaoping in terms of successful economic reforms, at the time when a significant portion of party members and the public rightly perceive that economic reforms and socio-economic progress are no longer number one priority for the Chinese leader.
Why does it matter?
The global expert community closely watches the Third Plenum, and the measures adopted can have far-reaching implications not only for the country’s internal politics and the socio-economic well-being of the Chinese population but also indirectly for the rest of the world due to global economic interdependence. This is especially true for high-income economies of the Indo-Pacific region, the European Union, and the United States, which are China’s main trading partners but also geopolitical rivals. Although we will have to wait for specific outcomes and the implementation of concrete proposed steps, this year’s session is unlikely to bring any groundbreaking changes. The party line will likely continue in the spirit of the current government policy – with a focus on centralizing the power and strengthening the propaganda work, emphasizing technological production over domestic consumption, and doing so at the expense of economic opportunities for the Chinese population.
