Editorial | Plenum must set clear direction for China in testing years to come

The Communist Party’s third plenum has often been a platform for announcing major changes in direction. Few have been as dramatic as that in 1978 led by paramount leader Deng Xiaoping, which turned the political chaos of the Cultural Revolution into history and put impoverished China on the road to opening up and reform. While this year, expectations of drastic revelations should be tempered, the meeting is nonetheless critical for China’s development over the coming decade.

General Secretary Xi Jinping is in the midst of helping the party choreograph a paradigm shift from an economy focused on traditional sectors to one with modern hi-tech and services, featuring “new quality productive forces” that help break the country out of the old growth model by leveraging technology, efficiency and quality.

It is no easy task. The four-day plenum, attended by some 370 full and alternate members of the Central Committee, got under way yesterday against a backdrop of murky economic data that only underscores the tough road ahead. The economy grew by a weaker than expected 4.7 per cent in the second quarter compared to a year earlier. Momentum slowed from the 5.3 per cent growth of the first quarter, though it is not far off the full-year target of “about 5 per cent”.

Consumption was weak and the property sector still in decline. But new economic growth was reflected in June exports, helped by surging shipments of electric vehicles (EVs), integrated circuits, as well as ships. Imports fell short, and retail sales were not as strong as would be desired. Yet, this is not an economy that is out of the woods, or one tipping into recession. The uneven growth is characteristic of an economy undergoing painful restructuring. Whether China can achieve higher productivity and quality with the same inputs is key.

China also is contending with pressures from the European Union and United States, which slapped tariffs on its exports of EVs and complain it is dumping lithium batteries and solar panels. Washington also has barred sales of high-end semiconductors to Beijing. Such pressures make the stakes all the higher. Each Central Committee serves a five-year term and the third plenum is closely watched. Markets may hope for major stimulus. That is unlikely as the meeting focuses on cementing strategic direction and policy priorities. Some changes may be afoot for the household registration – or hukou – system, and land and tax reform.

The main outcome will be to ensure the upper echelon of the 100-million member party reaches consensus and settles on a clear direction. Showing the way forward can help eliminate confusion at the local level and have a far-reaching impact for years to come. Once the way is set, more concrete measures are expected to follow.