Key points to understand China’s 3rd Plenum -- My takeaways

Since mid-July, there have been a lot of discussions about the 3rd Plenum in China. The full expression of the meeting is “the 3rd Plenary Session of the 20th Central Committee of the Communist Party of China (CPC).” Chinese people and China experts overseas know it is a very important meeting, so it became a hot topic even before the meeting was convened on July 15-18.

As I found there are curiosity as well as misunderstanding to some key issues related to the meeting, I would like to present you, my readers, my own takeaways about this meeting and the documents released from it. Hope this newsletter can provide you some useful information.

Why it is important?

The meeting decided the direction that China will go in at least the next 5 years, and outlined major policies, especially economic and social development policies. China is the No. 2 economy and the largest manufacturing and exporting country, so China’s policies may have impacts to the world.

Chinese people are looking into the Resolution of the Plenum for what changes it may bring to their lives, such as the retirement age delay policy, real estate policy, etc.

The world is observing whether the 2nd largest economy will continue growing, opening-up, and fighting climate change, etc. I think the documents released from the meeting gave the answers. It is sure that this meeting and its decision will change China and the world. It is actually a roadmap of China in the next 5 years. That is why this meeting attracted so much attention all over the world.

There are three important documents from the meeting -- the Communique, the Resolution and Xi Jinping’s Explanation of the Resolution. All of the three are important to understand the meeting.

What is the core point of the meeting and its decision?

The core point is “Further deepening reform comprehensively to advance Chinese modernization.”

Here I would like to provide some background information by analyzing the key words.

1) Reform

The first key word is Reform. Reform has special political and economic meaning in China. In 1978, Deng Xiaoping started the Reform and Opening up policy, which led to China’s economic development. China’s GDP at that time was only 367.9 billion Yuan, about 1.8% of the world’s total. Last year, China’s GDP reached 126 trillion Yuan (17.89 trillion USD), about 17% of the world’s total. Economic growth brought amazing changes to Chinese people’s lives. Chinese families have houses, cars, good education and better social welfare... China has historically eliminated extreme poverty by the end of 2020. Ecological environment is getting better and better. Chinese people take Reform and Opening up as the key reason for the economic and social development success. Sometimes Reform and Opening up was shortened as reform. Xi said in an article that “Reform and opening up is a key move that determines the fate of contemporary China, and it is also a key move that determines the success or failure of Chinese modernization. (改革开放是决定当代中国命运的关键一招，也是决定中国式现代化成败的关键一招) So, the Chinese government takes deepening reform (and opening up) as the key to solve social economic problems.

2)Deepening reform comprehensively

China’s reform has been focusing mainly on economic fields until the 3rd Plenum of the 18th Central Committee of the CPC was held in 2013. During that plenum, the Party decided to deepening reform comprehensively. “Comprehensively” means more fields are included, such as political, cultural, social, ecological fields and the Party’s self-improvement. That means the scope of reform are far larger than before.

3) Further deepening reform comprehensively

During this plenum in July, “further” were added in front of deepening reform comprehensively. Why? The Resolution explains:

“ To deal with complex developments both at home and abroad, adapt to the new round of scientific and technological revolution and industrial transformation, and live up to the new expectations of our people, it is vital that we continue to advance reform. Advancing reform is essential for upholding and improving the system of socialism with Chinese characteristics and modernizing China’s system and capacity for governance, for putting the new development philosophy into practice and better adapting to the evolution in the principal contradiction in Chinese society, and for adhering to a people-centered approach to see that the gains of modernization benefit all our people fairly. It is also crucial for responding to major risks and challenges and ensuring steady and sustained progress in the cause of the Party and the country, for promoting the development of a human community with a shared future and winning the strategic initiative amid accelerating global changes of a like not seen in a century, and for further advancing the great new project of Party building in the new era and making our Marxist party stronger. Reform and opening up are an ongoing endeavor rather than a task to be completed. All of us in the Party must consciously give more prominence to reform and further deepen reform comprehensively with a view to advancing Chinese modernization.”

To my understanding, in short, because the internal and external circumstances are developing, new problems keep on emerging while old problems are solving, China must further deepening reform comprehensively to meet new challenges and solve new problems.

4)Chinese modernization

Chinese modernization became a special political term after the 20th National Congress of CPC. (Full text of the Congress’ report is here)

The definition of Chinese modernization include the five characters:

—It is the modernization of a huge population. China is working to achieve modernization for more than 1.4 billion people, a number larger than the combined population of all developed countries in the world today. This is a task of unparalleled difficulty and complexity; it inevitably means that our pathways of development and methods of advancement will be unique. We will, as always, bear China’s realities in mind as we address issues, make decisions, and take action. We will neither pursue grandiose goals nor go by the rulebook. We will stay patient in advancing the course of history and take steady and incremental steps to sustain progress.

—It is the modernization of common prosperity for all. Achieving common prosperity is a defining feature of socialism with Chinese characteristics and involves a long historical process. The immutable goal of our modernization drive is to meet the people’s aspirations for a better life. We will endeavor to maintain and promote social fairness and justice, bring prosperity to all, and prevent polarization.

—It is the modernization of material and cultural-ethical advancement. Material abundance and cultural-ethical enrichment are fundamental goals of socialist modernization. Material want is not socialism, nor is cultural impoverishment. While continuing to consolidate the material foundation for modernization and improve the material conditions for people’s wellbeing, we will strive to develop advanced socialist culture, foster strong ideals and convictions, and carry forward China’s cultural heritage. We will thus promote all-around material abundance as well as people’s well-rounded development.

—It is the modernization of harmony between humanity and nature. Humanity and nature make up a community of life. If we extract from nature without limit or inflict damage on it, we are bound to face its retaliation. China is committed to sustainable development and to the principles of prioritizing resource conservation and environmental protection and letting nature restore itself. We will protect nature and the environment as we do our own lives. We will continue to pursue a model of sound development featuring improved production, higher living standards, and healthy ecosystems to ensure the sustainable development of the Chinese nation.

—It is the modernization of peaceful development. In pursuing modernization, China will not tread the old path of war, colonization, and plunder taken by some countries. That brutal and blood-stained path of enrichment at the expense of others caused great suffering for the people of developing countries. We will stand firmly on the right side of history and on the side of human progress. Dedicated to peace, development, cooperation, and mutual benefit, we will strive to safeguard world peace and development as we pursue our own development, and we will make greater contributions to world peace and development through our own development.

What are the must-knows in the documents?

1. The Resolution has 15 parts. The first part is a summary, the next 13 parts covers all the major aspects of reform, and the last one is about the Party’s self-improvement (Party construction). Sixty articles are listed in the 15 parts.

2. Economic reform is still the most important with 6 of the total 15 parts and 22 of the total 60 articles are about it. In his Explanation, Xi put giving play to the leading role of economic structural reform as the first highlight of the Resolution. The major tasks of economic reform include upholding and fulfilling the commitments to the public and non-public sectors, building a unified national market, and refining the systems underpinning the market economy.

3. Innovation has been put a lot of emphasis with some 3,000 words of the Resolution’s total 22,000 words about it. Xi puts developing support institutions and mechanisms for all-around innovation as the second highlight.

4. The third highlight is advancing reform in a comprehensive manner. Because the situation is complex and to avoid careless mistakes hurting any group of people’s interests, the government takes comprehensive manner to show it is responsible and very careful.

5. The fourth highlight is balancing development and security imperatives. Compared to the six policy fields of economy, politics, culture, society, ecology and party construction that should be put emphasis on (6个“紧紧围绕”）in the Resolution of the 3rd Plenum of the 18th National Congress of CPC in 2013, this plenum resolution adds one focusing field, the national security, and lists totally “seven focuses” (7个“聚焦”）. It means that the Chinese government will work harder to ensure safety. Because the principal contradiction facing Chinese society is changing from the people's growing material and cultural needs and backward social production to that between unbalanced and inadequate development and the people’s ever-growing needs for a better life, sense of safety becomes more important. China takes a holistic approach of national security. That means national security is not only referring to defense or political security, but also biological, financial, information, food, ecological, and many other security.

6. The fifth highlight is strengthening the Party’s leadership over reform. That is always the first of the first things in a Party resolution.

7. Though the Resolution is a general outline, there are still over 300 policies counted to be implemented. More detailed policies will soon follow, and all of the targets set in the Resolution will be reached by 2029. You know, Chinese people is good at planning and always work diligently , so the targets usually will be reached.

8. The Communique listed risks in real estate, local government debt, small and medium financial institutions fields among other key areas as the major risks to be prevented and defused. That means the government will take more measures in these fields.

9. In his Explanation, Xi talked about the major problems China is facing:

“At present, unbalanced and inadequate development remains a pronounced problem in promoting China’s high-quality development. For example, the market system still needs improvement; the market itself is not adequately developed; the relationship between the government and the market needs to be further straightened out; our innovation capacity falls short of the requirements for high-quality development; the industrial system, while large in size and extensive in scope, is not yet strong or sophisticated enough; the over-reliance on key and core technologies controlled by others has not been fundamentally changed; the foundations of agriculture need to be further strengthened; wide gaps persist in development and income distribution between urban and rural areas and between regions; and weak links remain in improving the people’s wellbeing and protecting the ecological environment.”

He saw all of these challenges reflect the evolution of the principal contradiction in Chinese society and are the result of ongoing development. So they are going to be addressed by further deepening reform comprehensively on an institutional basis.

10. To ensure the success, the reform should be more integrated, focused, and effective.

11. Two new laws will be formulated: a private sector promotion law and a financial law.

How these decisions were made?

From a Xinhua report “Nativity of the Resolution”, we learned that the drafting group started to consulting party members and non-CPC party and organization members since last November and 111 reports of suggestions were collected from the first round of consultation.

In last December, 55 departments of the central governments conducted research on 38 topics and wrote 78 reports. At the same time, 16 investigating groups went to all the provinces and autonomous regions to do field researches.

Since late December, the drafting group consulted all high-level party, state and provincial leaders and wrote one report after each interview.

In May, a draft was sent to the department and provincial level for suggestions and revision. Meanwhile, Xi convened 2 consulting meetings with non-CPC parties and organizations and business, intellectual circles.

After that, 3 Politico Bureau Standing Committee meetings and 2 Politico Bureau meetings were held to discuss and revise the new draft.

During the plenum, the latest draft still got some small revision after discussion of the Central Committee members.

So the Resolution did not come easily. After at least dozens rounds of revision, it combined the wisdom of government officials from all departments and provinces, many experts and people from all walks of life.

What are the misunderstandings and why?

1)There’s nothing new or important in the documents.

Wrong. The documents outline what China will do in at least the next 5 years under current internal and external circumstances. There are many new policies put in the documents and more detailed news policy will come out soon.

There may be expectations to see some radical policies announced in this plenum. But as the path China is going is correct, there’s no need to make a U-turn.

The policies announced in the resolution are practical and cautious. The drafting group set three principles for which policy should not be written in the Resolution -- those too ordinary, those still developing, those have already been announced and are under implementation. So all the policies included in the Resolution are those with strategic importance, forward-looking, and will have meaningful contribution to reform.

2)China is going backward towards planning economy as the government will intervene more into market and encouraging state enterprises to grow stronger.

Wrong. The plenum reiterated the “Two Unswervinglys” (Unswervingly consolidate and develop the state-owned companies while unswervingly encourage, support and guide the development of private companies. It was announced firstly in 2002 and never changed) China’s policies toward market, toward non-public sectors and private enterprises, will not change. Because there are nearly 25 million private enterprises in China, and their role and contribution can be summarized by five numbers, namely "56789". "5" means that private enterprises contribute more than 50% to the country's tax revenue. "6" means that the GDP, fixed asset investment and foreign direct investment of domestic private enterprises all exceed 60%. "7" means that high-tech private enterprises account for more than 70%. "8" means urban employment by private enterprises exceeds 80%. "9" means that private enterprises' contribution to new employment has reached 90%. So maintaining the “Two Unswervinglys” policy is very important to China’s economy.

It is important to know that the socialist market economy with Chinese characteristics is different with the capitalist market. For example, China is managing to lift restrictions on the market while ensuring effective regulation, striving to better maintain order in the market and remedy market failures. This is very different from the capitalist market in which capitals can do anything as they like, and governments can not effectively regulate them due to all kinds of reasons.

3) Deng’s reform era is ended by this plenum.

Nobody in China will think so. The goal in Deng’s era is the same with the current one, that is the better life of Chinese people. And all the major principles in Deng’s reform are still guiding current reforms. Later this month, there will be some events including a national academic seminar to commemorate the 120th anniversary of Deng’s birth. Let’s see what are the words.

4)China now prioritizes national security over economic development.

Wrong. Firstly, as the Resolution said, development, stableness and security are put at the same level with same importance. Secondly, China’s security view has been broadened to a holistic approach. Now the national security meaning scope includes all aspects that will give people sense of security and safety. Economic safety is certainly included.

These are all what I am currently thinking of. Welcome your questions and comments.