You can see why hopes are high for China’s long-awaited third plenum. The country’s post-Covid economic recovery has been tricky – and at times complicated by the lack of a clear mandate from the top. That’s why, nine months after it was initially expected, businesses at home and abroad are pinning their hopes on the third plenum to provide a “big bang” moment that sets out a fresh direction on economic policy and ensures China’s role as an engine for global growth.
To be fair, there’s precedent for this. Previous third plenums, which are held roughly once every five years and fall between landmark party congresses, are credited with ushering in “epoch-making” new economic agendas. The most famous example, in 1978, was the de facto beginning of Deng Xiaoping’s “reform and opening up”, but President Xi Jinping’s own third plenum, in 2013, similarly marked the beginning of a new phase of “comprehensively deepening reform”.
But all this economic speculation misses something important: this isn’t even an economic meeting. Third plenums – and all plenums, for that matter – are about as political as they get. These are party, not state, gatherings that bring together all 376 full and alternate members of the Chinese Communist Party’s (CCP) Central Committee to meet at roughly year-long intervals. These sessions don’t have the power to codify economic reforms, but they do issue all-important guidance on policy direction across a host of critical issues.
That means when top leadership talks about “deepening reforms” or “advancing Chinese-style modernisation” – the themes of this year’s agenda – they’re talking about something much broader than economic adjustment alone. Reforms have to run deep: leaders want a holistic reworking of China’s governance structures and disciplinary standards that prepares both the party and country for an increasingly difficult external environment.
Of course, there are big economic components to this. Officials, including Xi himself, have spent the past few months soliciting advice and dropping hints on the likely agenda. Back in March Xi personally discussed China’s reforms with a group of United States business leaders, and in May he heard proposals from business executives, including a handful representing multinational corporations, during a symposium in Shandong. Those meetings suggest that some level of reassurance for foreign businesses is on the way.
Domestically, the Chinese People’s Political Consultative Conference, effectively a political advisory body, recently released its own series of recommendations from 14 of its top economic thinkers. Their recommendations aren’t binding, but provide a good measure of the parameters for acceptable debate: priorities include reducing rural-urban inequalities, improving innovation in free-trade zones and breaking down provincial barriers to build out a “unified national market”.
Last but not least will be measures to boost the development of “new quality productive forces”. First mentioned by Xi last September, the slogan refers to attempts to break China away from its traditional growth model by focusing on technological innovation. This includes both digitalising the country’s existing industrial base and giving it a head start in industries of the future, such as advanced manufacturing, quantum, artificial intelligence and robotics. In central leadership’s eyes, technological innovation is China’s primary hope to resist pressure from the United States and ensure long-term security.
“New quality productive forces” may not be a catchy slogan, but it’s crucial. In just the first seven months since the term was first used by Xi, he mentioned it another 20 times and 1,073 articles referring to the concept appeared in China’s largest academic database – both surefire signs that technological innovation will be a central plank of the plenum.
But all these clues also point to something more fundamental: there’s no paradigm-shifting moment coming.
Deng and Xi’s pivotal third plenums had something in common: emerging leaders looking to secure the upper hand over factional rivals and put their own stamp on party direction going forward. Just two years after Mao’s death in 1978 – during which Deng was not even formally party chairman – Deng still managed to sideline more left-wing opponents to usher in a series of market-oriented reforms, a move credited since as the beginning of China’s seismic “reform and opening up” policy. At the 2013 third plenum, a meeting Xi has since hailed as being on par with 1978, Xi bundled more than 300 economic, institutional and security reforms into an ambitious package that aimed to “comprehensively deepen reform” – and, in doing so, laid the groundwork for his remarkable centralisation of policy power.
It’s telling that, at the time, this reform package was seen as a promising sign of economic liberalisation. But beneath the headline-grabbing economic measures were equally important institutional reforms that were arguably a better reflection of the tone to come. In fact, even Xi’s famous quote that “the market plays a decisive role in the allocation of resources” has an often-forgotten second half: “but by no means does it play a total role”.
In the decade since, that second half has been equally key to understanding how China’s dynamics are evolving. In fact, Xi’s second term, from 2018 to 2023, didn’t even have a plenum focused on economics. It did, however, include the abolition of presidential term limits and a landmark new “resolution on history” – a sign that economic reform was taking a backseat to new political priorities.
All this means that, as always, this week’s plenum will put politics first. And as top leadership navigates mounting pressure from abroad and economic pressure at home, the meeting takes place in a very different political environment than five or ten years ago.
Such a complex environment might explain this plenum’s mysterious delay, as convention suggested the meeting would be held late last year. While the nine-month delay doesn’t technically violate party rules, it has ramped up pre-plenum speculation even further than normal.
Prior to Xi, this delay would have been a tell-tale sign of factional infighting. The plenum’s flagship “decision” document is pre-decided, so stakeholders need to be carefully aligned before coming to the table. While Xi has all but eradicated the CCP’s previous power-sharing model, it could be there’s still been more technical debate on elements of China’s post-Covid economic direction.
Equally, it could be that high-profile corruption investigations into ministers and military leaders have contributed to the delay. There’s a chance this plenum might bring a bit of clarity to the fates of Qin Gang and Li Shangfu, former foreign and defence ministers, respectively, as they potentially look set to be struck from their roles on the Central Committee.
But whatever the reason for the delay, there’s no sign that ousted ministers or ongoing debate on the finer details of economic policy are chipping away at Xi’s impressive centralisation of power – and that reduces the pressure for bold economic reform.
Instead, expect a doubling down on things like ideological discipline, moves to reinforce party leadership and attempts to smooth centre-local relations. While these measures may get less attention – and have less immediate impact on markets – in the long term they’re the forces fundamentally reshaping the operating environment for foreign businesses and governments alike.
In other words, the plenum is not about to provide the complete economic clarity many are hoping for – nor the big consumer stimulus package. But it’s still vital: for anyone looking to understand long-term economic strategy in China’s hyper-centralised system, politics is the place to start.