By Chan Ka Sing
HONG KONG – China’s President Xi Jinping has talked up his plans for “a series of major measures” to reboot growth, as the country faces chronic problems from distressed local government finances to weak consumption.
His solutions will be unveiled in mid-July when some 370 top party officials gather in Beijing for the five-yearly Third Plenum.
Previous meetings jolted the economy by tackling structural issues. A similar conclave in 1978 paved the way for foreign businesses to operate in China; another in 1993 ushered in a liberalisation of the yuan and embraced a socialist market.
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The latest gathering will determine whether China will re-establish itself as “investible” in the eyes of capitalists.
Expectations of what may emerge are mixed; the latest plenum is over six months delayed and follows a period of political change that culminated in the abrupt removal of three ministers.
The meeting is also taking place three years into a property crisis and following a $2 trillion sell-off in Chinese equities between 2022 and 2023, a slump triggered by Beijing’s regulatory crackdowns and by its worsening geopolitical relationship with Washington.
Xi’s top challenge is to steer China towards “high-quality development” and simultaneously manage financial imbalances. China needs a more efficient national distribution of income.
Tax reform could hand more income to indebted local governments. It could also see an expansion of the welfare net which could reinvigorate individual spending.
Specifically, investors will look for the plenum to define the role of the private sector. State giants looked set to thrive following the pandemic as technology giants including Alibaba were cut to size.
Yet, the latest message is more welcoming to entrepreneurs. Xi chaired a symposium in May and listened to opinions on how to optimise the environment for private enterprises.
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He also has asked why the number of $1-billion-plus startups, or unicorns, has dwindled.
A front-page op-ed this week in the People’s Daily called for further opening up to foreign investment, which shrank for the first time in over a decade last year.
It’s asking for a lot for one meeting to reverse the trend but, if Xi follows through on his recent rhetoric, this year’s Third Plenum will be remembered in the same bracket as its 1993 and 1978 iterations. (Reuters Breakingviews)
