China doubles down on its ‘existing strategy’   

China’s ruling Communist Party concluded a highly anticipated conclave this week, promising to boost economic growth while reiterating the importance of maintaining national security.

In a communique at the end of the four-day, closed-door Third Plenum, the Central Committee laid out reform objectives to be completed by 2029 – the 80th anniversary of the People’s Republic of China.

The Party’s top decision-making body also vowed to finish “building a high-standard socialist market economy in all respects” by 2035. The communique said:

All of this will lay a solid foundation for building China into a great modern socialist country in all respects by the middle of this century.

To achieve these goals, it said the country must better utilize market mechanisms and double down on efforts to promote “high-quality development.” 

Key meeting

This would include prioritizing investment in advanced technologies and facilitating growth through technological and scientific innovation:

We must deepen supply-side structural reform, improve incentive and constraint mechanisms for promoting high-quality development, and strive to create new growth drivers and strengths.

The key political meeting comes as China’s economic growth slowed to 4.7% in the second quarter, prompting banks such as Goldman Sachs to lower their 2024 GDP growth forecast from 5.0% to 4.9%.

At the same time, China’s property crisis continues as investment in the sector dropped 10.1% in the first six months of 2024 compared to a year earlier. Consumer confidence also remains weak.

To address these challenges, Beijing promised to implement measures to defuse risks in the property sector while improving income distribution, the job market, social security, and the health care system. The communique stated:

Ensuring and enhancing the people’s well-being in the course of development is one of the major tasks of Chinese modernization.

As local governments across the world’s second-largest economy face mounting debt from the property crisis, the Third Plenum statement stressed the need to roll out fiscal and tax reforms:

The Party must [also] promote equal exchanges and two-way flows of production factors between the cities and the countryside, so as to narrow the disparities between the two and promote their common prosperity and development.

Critical areas

As foreign investors closely monitor signals coming out of the conclave, the Party said it would remain committed to “opening to the outside world.” 

It also promised to “expand cooperation” with other countries:

We [will] still expand institutional opening up, deepen the foreign trade structural reform, further reform the management systems for inward and outward investment.

Analysts say the communique shows that Beijing is focusing on areas critical to China’s national strength, including technology and advanced manufacturing.

“This isn’t Western-style market liberalization – it’s about reinforcing China’s existing strategy,” Lizzi Lee at the Asia Society Policy Institute’s Center for China Analysis said in a written response to Voice of America, adding:

The document cements Xi’s governance approach and his brand of reform, which focuses on consolidating power rather than adopting new liberal economic paradigms, endures.

In addition to laying out the long list of reform goals, the communique also highlighted the need for the Party to balance development and security:

We will strengthen the network for preventing and controlling public security risks so as to safeguard social stability [and] improve public opinion guidance and effectively deal with risks in the ideological domain.

Deepening reforms

The document also reiterated that the Party’s top leadership, especially President Xi Jinping, remains the “fundamental guarantee” for deepening reforms. The communique said:

We must uphold Comrade Xi Jinping’s core position on the Party Central Committee and in the Party as a whole and uphold the Central Committee’s authority and its centralized, unified leadership.

Experts say the emphasis on upholding public security and following the guidance of Party leadership shows Beijing is trying to tighten control over efforts to reform China’s troubled economy.

Dexter Roberts at Atlantic Council’s Global China Hub told VOA by phone:

Tightening control is at the heart of [Beijing’s] dilemma because in order for the reforms to work, they need to loosen control.

While other detailed reforms are expected to be rolled out in the coming days, Lee at the Asia Society Policy Institute’s Center for China Analysis said she expected consumer spending in China to remain sluggish.

Recovery in the property sector will also remain slow with Lee pointing out:

The prolonged transition period poses significant risks. It could lead to reduced investments and slower economic growth.

Analysts also think that Beijing’s state-led model is unlikely to yield the results the government hopes for.

Jobs growth

Andrew Collier, the managing director of Orient Capital Research in Hong Kong, told VOA in a video interview:

China’s state-led investment, which concentrates resources on areas such as semiconductors and artificial intelligence, is going to take years to pay dividends, and meanwhile, the economy will continue to fail to deliver growth and jobs.

He said unless Beijing takes concrete steps to reduce its involvement in economic reforms, the country’s downturn could grow worse in coming years.

William Yang is a correspondent for Voice of America based in Taiwan.

This article is republished courtesy of Voice of America. Read the original article here.

The views and opinions expressed in this article do not necessarily reflect the official policy of China Factor.