By Tsering Dhundup
DHARAMSHALA, July 19: China Watchers say the ruling communist party of China has set ambitious long-term policy goals at its crucial political meeting on reform, but offered little detail on how to pull the world’s second-largest economy out of a worsening downturn, during the third plenary session of the 20th Communist Party of China Central Committee in Beijing.
In the closed-door meeting held from July 15th to 18th, President Xi Jinping and officials from the Central Committee of the Communist Party of China (CCP) pledged to modernise the country’s industrial complex while expanding domestic demand and stimulating growth, all while curbing debt risks. The four-day meeting, known as the third plenum, highlighted the complex contradictions within China’s economic policy goals.
Since 1982, the CCP Politburo and its Central Committee have typically convened seven plenums every five years. The first and second plenums focus on senior party leadership appointments and restructuring governmental institutions. The third plenum often introduces major policy initiatives for the next five to ten years. Historical precedents include Deng Xiaoping’s 1978 reforms, which set China on the path to becoming an economic superpower, and Xi Jinping’s 2013 plenum, which led to the abandonment of the one-child policy and encouraged private investment in state-owned businesses.
This year’s plenum took place amid growing pressure for changes in the world’s second-largest economy. Domestic consumer and business sentiment are near record lows, and global leaders are increasingly concerned about China’s export dominance. Chinese officials acknowledged the sweeping list of economic goals re-emphasized at the meeting contained “many complex contradictions,” indicating challenges ahead for policy implementation.
A key concern is the need for a structural shift that gives consumers a greater role in the economy. Without this shift, debt may continue to outpace growth as Beijing finances its industrial modernization and global prominence goals. Contradictions in Chinese policy efforts have been present for decades, including goals to increase manufacturing value-added, enhance social security, liberalize land use, and improve local government tax revenues.
China is expected to publish a document with more detailed policy plans in the coming days. However, the initial post-plenum announcement borrowed heavily from China’s existing playbook, disappointing some economists. According to reports recent discussions on Chinese social media have speculated whether the country has entered a period of economic stagnation or regression, termed the “garbage time of history.”
After a similar plenum in 2013, Beijing launched a policy agenda that included most of the goals announced this week but also ambitions to liberalize financial markets and make domestic consumption a more prominent driver of growth. A capital outflow scare in 2015 halted many of these plans. Many analysts argue that national security considerations have pushed China in the opposite direction in recent years, tightening control over sectors like tech and finance.
Instead of leaning on household demand, Beijing has poured resources into infrastructure and real estate, leading many local governments to accumulate unsustainable debt. Recently, Beijing has highlighted advanced manufacturing as a new growth driver, again sidestepping consumers, with leaders hoping an industrial leap could save China from the middle-income trap and stabilize the job market.
The plenum reasserted China’s quest for “new productive forces,” a term coined by Xi last year that envisions scientific research and technological breakthroughs for industrial expansion. “There is still tension between expanding the supply side of the economy and boosting household spending,” said Harry Murphy Cruise to Reuters, an economist at Moody’s Analytics. “The communique mostly focused on ‘new productive forces,’ ‘the scientific and technological revolution,’ and ‘industrial transformation.’ Mention of support to household wellbeing didn’t come until the tail end.”
