By Geoff Raby
Like the curate’s egg, the Communiqué of the Third Plenum of the 18th Party Congress is partly good and partly bad. Contrary to much of the Chinese government’s pre-Plenum hype, which indicated a bold roadmap of future economic reform would be unveiled, the results are instead a finely balanced compromise between those wishing to preserve the status quo (and the privileges they derive) and those who understand that China must move on if it is to continue to grow.
On economic reform, not surprisingly the Communiqué reaffirmed the correctness of the past 35 years of reform and open door policies and said that the overall of objective of the Plenum was to “comprehensively deepen reform and improve and develop the socialist system with Chinese characteristics” (A market economy with Chinese characteristics, November 13).
It said the “market had a decisive role in allocating resources”. Policy would therefore set about “deepening economic reform, uphold[ing] and improv[ing] the basic economic system, accelerat[ing] the improve[ing] the modern market system, macro-control system, [and] open[ing] the economy".
Although a big test for the leadership, it was expected that the Plenum would at least begin to address the dominance of state-owned enterprises in the economy. Instead, the Communiqué marks a singular victory for their defenders.
Balancing market-oriented reform sentiments, the Plenum reaffirmed “public ownership is dominant”. The Party has committed itself to “unswervingly consolidat[ing] and develop[ing] the public economy, adhere to the dominant position of public ownership [with the] state-owned economy to play[ing] a leading role”. At the same time, the Party would “support and guide” the development of the non-state sector, including through protecting property rights. This does not go much beyond the formula of the “socialist market economy” laid down by former President Jiang Zemin in 1993.
Hopes had been raised in pre-Plenum discussions that financial sector reform would feature prominently in the Communiqué. Unlike other parts, this section was notable for its economy of language. On financial sector reform, it said only that it was necessary to “improve the financial market system”.
Separately, in one of the more intriguing passages which seemed to be hinting at greater openness to adapt to “globalisation”, the Communiqué said it was necessary to open “to the outside [world] … better integrate and promote the free flow of international and domestic factors [of production]” and accelerate “the development of … new competitive advantages in international economic cooperation [and] to relax investment access [and] speed up free trade zones”.
Other pressing areas for attention, such as cutting back government regulations and approvals procedures, public finance and fiscal arrangements, and land reform in rural areas were mentioned as priorities without details of what might be done. The Communiqué called for “new urban-rural relations, so that the majority of farmers [have] equal participation in the process of modernisation [by] “the construction of new agricultural management systems [and] giving farmers more property rights”.
Contrary to expectations, the Communiqué covered a smorgasbord of issues from the legal and political systems, socialist culture and socialist soft power, and education, while even the military made it into what was primarily to have been this leadership’s key-note economic statement.
The only concrete outcomes from the meeting seem to have been agreement to establish two new policy bodies. One is a National Security Committee with unclear functions. According to Xinhua’s explanation, its remit is domestic security issues directed towards maintaining social stability rather than foreign policy, unlike its US namesake. It begs the questions why, with the massive internal security arrangements China has, another layer needs to be added and what was lacking previously? Some have speculated that this is an attempt by President Xi Jinping to consolidate control of internal security in his hands.
The other new body to be established within the Party is the “Central Leading Team for Comprehensively Deepening Reform”. Again, Xinhua explains this group will be in charge of designing, coordinating and “pushing reform forward” and for “supervising” the implementation of reform plans.
If true to its mandate, the establishment of this group to oversee and steer reform policies may well be the most significant outcome of the entire Third Plenum.
The Third Plenum, which had been so eagerly anticipated, was in the end long on rhetoric and short on action. Even the rhetoric sent mixed messages, indicating hard-fought political compromises behind the scenes. We still do not know where Xi Jinping stands on economic policy and how hard and fast he is prepared to push reforms, especially in sensitive areas such as the financial sector and rural land ownership. The work of the newly established Leading Team on reform will therefore warrant close attention.
Geoff Raby is Chairman and CEO of Geoff Raby & Associates and a former Australian Ambassador to China.
This article first appeared in the Australian Business Review: