The Long March from the Third Plenum

BEIJING The Chinese Communist Party has released the final document of the Third Plenum of the 18th Central Committee. In the CCP s history, the third plenum has traditionally been the occasion for the party to announce its major policies for the next 5 10 years.

China s Plenum Test

Last month, President Xi Jinping announced a set of sweeping economic reforms at the Central Committee s Third Plenum, setting forth his vision of the great rejuvenation of the Chinese nation.

And, following the Third Plenum of the Chinese Communist Party s 18th Central Committee last November, China s leaders declared their commitment to allowing the market to play a greater role in shaping economic outcomes.

The 60 point resolution produced at the most recent Third Plenum covers six areas the economy, the political system, the environment, culture, society, and Party capacity building. This represents a significant departure from the agendas produced at previous Third Plenums, which focused exclusively on economic reform.

The matter is pending at the plenum of the Council of State.

Its Third Plenum reforms provide a cohesive framework for a pro consumption transformation. Though America currently remains intent on resurrecting a tired growth model, there is good reason to hope that it, too, will eventually rebalance.

BEIJING Though China s leadership succession was completed earlier this year, the policy agenda for the coming decade has only just been revealed. Following Chinese political tradition, the country s new leadership had to wait for the Third Plenum of the Chinese Communist Party s 18th Central Committee held 3 4 quarters after the First Plenum, where the succession was sealed to unveil its economic policy priorities.

The Third Plenum of the 18th Party Congress gave primacy to the principle of market competition but, as a senior Chinese banker commented in a related context some years back It s quite hard to compete when you re playing against the referee.

Indeed, it was at the Third Plenum of the CCP s 11th Central Committee that Deng Xiaoping launched the reforms that opened up the Chinese economy and triggered more than three decades of rapid economic growth. The Third Plenums of the CCP s 14th and 16th Central Committees held in 1993 and 2003, respectively also stand out.

To build the innovative economy envisioned by the third plenum, the CCP s leadership needs to find a new governance model that fosters a vibrant society. Sooner rather than later, the crucially important economic reforms that have just been unveiled will not be enough.

Xi s moves to strengthen his hand have helped to convince observers that he means business with the reform agenda. Since the Third Plenum ended and the scope of Xi s reforms has become clear, many China watchers have hailed him as the most transformative leader since Deng.

My question was set in the context of the new thrust of Chinese reforms announced at last November s Third Plenum of the 18th Central Committee of the Chinese Communist Party, which emphasized the decisive role of market forces in shaping the next phase of China s economic development.

The next day, 29 March, the 2005 State budget was passed by a Knesset plenum, averting the need for new elections.

But the third plenum also provided surprises, including the creation of a leading group within the CCP to steer reform. China used to have a reform commission within the executive branch the establishment of the leading group indicates the CCP s commitment, and that of President Xi Jinping, to comprehensive reform.

In assessing the outcome of the Third Plenum, what observers should really be looking for is evidence of a bold strategy for political reform. If Xi and his colleagues produce no credible sign of such a commitment, everything else will be eyewash and skepticism about China s fate under their leadership eventually will be vindicated.

Despite bold reform plans outlined at the recent Third Plenum of the 18th Central Committee of the Chinese Communist Party China s prospects remain compromised by deep rooted contradictions. For example, the inherent tension between the social change that development demands and the imperative of political stability required by authoritarian rule makes the current situation unsustainable in the long run.

TOKYO There is something odd and disturbing about the conventional wisdom surrounding the upcoming Third Plenum of the 18th Central Committee of the Chinese Communist Party (CCP). As the November 9 12 conclave draws near, the international community s attention seems to be focused mainly on technocratic policy changes deemed essential to restructuring China s state dominated economy and reenergizing growth.

BEIJING History will be the ultimate judge, but there is good reason to believe that China s recently completed Third Plenum will come to be regarded as a pivotal moment in the country s development. At long last, China s senior leadership has endorsed a raft of reforms that could impel the economy s shift from reliance on exports to consumption led growth.

The reforms endorsed by the Third Plenum focus on this wedge between income and consumption, offering specific proposals aimed at altering the behavior of fear driven Chinese families. Especially important is the proposal to channel 30 of the profits of state owned enterprises (SOEs) currently running at close to 400 billion into the country s woefully under funded social safety net.

But, when it comes to economic reform objectives, the resolution is not overwhelmingly innovative. Indeed, most of the goals that it includes like reform of state owned enterprises (SOEs), development of private enterprise, reduction of government intervention, protection of property rights, and creation of a modern market system can be found in the resolution of the Third Plenum of the CCP s 16th Central Committee.

Although the resolution s general message is encouraging, a shopping list of reform objectives is not a strategic analysis of the contradictions that are undermining China s development, let alone an action plan for responding to these contradictions. Indeed, for China s new leadership, the successful completion of the Third Plenum is only the first step in a new long march toward a more stable, prosperous future.

Second, the Third Plenum established a new high level organization the so called Central Leading Group on Reforms. This small group, likely to be headed by Xi, will play the key role in drafting specific guidelines for implementing the Plenum s proposed reforms thus threatening to marginalize the long dominant technocrats of the National Development and Reform Commission, the heir to the old State Planning Commission.

This is related to the final document s most significant lacuna political reform. In fact, a Singapore style approach combining a freewheeling market economy and an authoritarian regime has clearly emerged from the plenum.

China is no exception. The focus on resolving China s macroeconomic disconnect, reflected at the Fifth Plenum and a likely precursor of what to expect in the upcoming 13th Five Year Plan, is thus very encouraging.

On the third floor, sir. On the third floor.

In China, November s Third Plenum of the Communist Party Central Committee will show whether China is serious about reforms aimed at shifting from investment led to consumption led growth. Meanwhile, China s slowdown has contributed to the end of the commodity super cycle, which, together with the sharp rise in long term interest rates (owing to the scare of an early Fed exit from QE), has led to economic and financial stresses in many emerging market economies.

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Its 12th Five Year Plan, enacted in March 2011, lays out a broad framework for a more balanced growth model that relies increasingly on domestic private consumption. These plans are about to be put into action. An important meeting in November the Third Plenum of the Central Committee of the 18th Chinese Communist Party Congress will provide a major test of the new leadership team s commitment to a detailed agenda of reforms and policies that will be required to achieve this shift.

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