By Rebecca Feng in Hong Kong and Chun Han Wong in Singapore
Chinese leader Xi Jinping and several hundred top Communist Party officials gathered in Beijing this week to address the country’s struggling economy. Despite recognizing significant economic issues, they reaffirmed their commitment to state-led development, indicating a future that closely resembles the present.
Acknowledging Economic Problems
Economic growth has sharply dipped as China grapples with an unbalanced recovery from the Covid pandemic. In a communiqué issued at the end of the four-day meeting, known as the Third Plenum, the Central Committee of the Communist Party candidly acknowledged various economic problems. These include significant risks in the property sector, mounting local-government debt, and the vulnerabilities of small and midsize financial institutions. The communiqué also promised to tackle the persistent issue of lackluster demand, which has plagued the economy.
Commitment to Current Economic Model
Despite the unusual candor in addressing these threats, the officials did not signal any major reforms. Instead, they reaffirmed Xi’s vision for a state-driven model of development that prioritizes economic security and technological dominance. This approach, many analysts argue, exacerbates the economy’s imbalances rather than addressing them.
Steve Tsang, director of the SOAS China Institute in London, remarked that the communiqué “essentially reaffirms the approach and direction of travel Xi Jinping has set for China, despite the serious challenges, particularly in the economic arena, that China faces today.” He added that while Xi’s emphasis on Communist Party control “will ensure political and social stability in China in the foreseeable future, it will not do much to restore economic vitality.”
Economic Targets and Future Plans
Officials stood by the government’s 5% growth target for this year, which some economists believe will be difficult to achieve. They also pledged to nurture “new productive forces,” a term referring to tech-led industries that Xi believes will drive China’s future growth. The communiqué highlighted security as the foundation of national development.
The document is intended to convey the Central Committee’s broad outline on promoting “Chinese-style modernization,” a term Xi uses to distinguish China’s authoritarian development approach from Western models. A more detailed plan is expected to be released soon.
Strengthening State’s Economic Role
While the communiqué was vague, it made clear that Xi intends to strengthen the state’s role in economic development, rather than expanding market and consumer influence as some economists have suggested. The document repeatedly cited the need to “persist” (jianchi), echoing state-media messages that cast resistance to Xi’s vision as evidence of its necessity.
Some previous iterations of the Third Plenum delivered major economic overhauls. For instance, in 1978, the party embraced then-leader Deng Xiaoping’s “reform and opening-up” policy, leading to decades of economic growth. In 2013, officials affirmed the market’s “decisive” role in the economy and relaxed the one-child policy. There was no mention of the market’s “decisive” role in the latest communiqué.
Current Economic Challenges
China’s economy grew 4.7% year-over-year in the second quarter, down from 5.3% in the first quarter. The economy faces multiple interconnected challenges: a prolonged housing market crisis, substantial local government debt, reduced consumer spending, and escalating trade tensions. Moreover, the country’s population is rapidly aging.
Despite numerous measures to revive the property sector, new home sales and prices continue to decline. Local governments’ hidden debt is estimated to be between $7 trillion and $11 trillion, according to economists and academics. Addressing this issue would require significant reforms in how Chinese cities fund themselves, as Beijing controls the purse strings and limits local government borrowing, yet cities are responsible for economic growth.
Some economists had hoped the government would overhaul the consumption tax, generating new revenues for local governments. However, no such reforms were announced.
Contradictory Messages and Leadership Changes
Contradictory messages in state media illustrate the dilemma Xi faces: promoting a state-dominated development approach while trying to reassure foreign investors. On Wednesday, the Communist Party’s flagship newspaper, People’s Daily, published a front-page commentary defending Xi’s reform agenda and criticizing foreign attempts to measure China’s progress by Western standards.
The commentary stated, “General Secretary Xi Jinping emphasized that our continuous efforts to promote reform ‘aren’t meant to pander to the applause of certain people, and we shouldn’t forcibly apply Western theories and perspectives onto ourselves.'”
This tone contrasted sharply with a lengthy profile published earlier by the official Xinhua News Agency, which described Xi as “another outstanding reformer” comparable to Deng Xiaoping. The profile, intended for foreign audiences, praised Xi for “unleashing the power of the market.” It was published in multiple languages, including Chinese, English, French, and Spanish, but the Chinese version appeared only in Hong Kong media and was absent from major state-media outlets.
Leadership Changes and Implications
The plenum took place months later than expected, highlighting procedural unpredictability. The roughly 17-month gap between this conclave and the previous one in February 2023 is one of the longest intervals between plenums since the Mao Zedong era. This delay has renewed questions about Xi’s departure from longstanding procedural norms and raised concerns about policy unpredictability in the world’s second-largest economy.
At the plenum, the Central Committee approved several leadership changes, including the resignation of former foreign minister Qin Gang and the expulsion of three People’s Liberation Army (PLA) generals. Qin, who joined the Central Committee as a full member in October 2022, was replaced as foreign minister in July 2023 without explanation. Reports indicated that an internal party investigation found Qin had engaged in an extramarital affair during his tenure as China’s ambassador to the U.S. from 2021 to 2022.
The three expelled PLA officials, including former defense minister Li Shangfu, were accused of severe violations of party discipline and the law. Li, China’s shortest-serving defense minister, was ousted after seven months in the role. Last month, the party expelled him over alleged corruption, including giving and receiving bribes, and his case has been handed over to prosecutors.
The recent plenum underscores Xi Jinping’s unwavering commitment to a state-led economic approach amid significant internal and external challenges, reflecting the complexities and uncertainties facing China’s political and economic landscape.
