Alicia García-Herrero
China’s third plenum, taking place in Beijing from 15 to 18 July, is a once-in-every-five-years conclave of the Central Committee of the Chinese Communist Party, where a range of policies to address long-standing issues are unveiled. Historically, this event has seen announcements of major policy shifts and economic reforms. This time around, markets and China watchers hope the third plenum can answer a specific question: will sufficient growth-enhancing measures be announced to revive the Chinese economy after years of underwhelming performance?
The party’s official channels have been previewing the third plenum as a platform for “comprehensive” reforms, but foreign observers and some academics are not convinced. Increasingly serious problems have been piling up for China during the last few years, including the demise of the real-estate market, the difficult financial situation of local governments, rapidly declining returns on assets because of over-investment and the deflationary pressures in the economy.
The response to all these woes, as aired by China’s leadership during the past few months, will be the further strengthening of China’s manufacturing capacity under the mantra of ‘new productive forces’. Chinese manufacturing capacity is already nearly a third of global capacity, while its consumption is less than half that amount. Given such a huge imbalance, one might expect that measures to foster private consumption would be the main takeaways from the third plenum, but this does not seem to be the direction China’s leadership is taking.
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