Nathaniel Sher and Ray Wang
In the days ahead of the Chinese Communist Party’s long-delayed Third Plenum, few observers expect that the reform announcements will be enough to revive confidence in the economy. Instead, most expect more of the same: a focus on Party centralization, national security, technology-led development, and skepticism toward foreign businesses. This is despite the fact that China’s economy continues to struggle with a property downturn, weak consumer and business sentiment, distressed local government finances, and subdued foreign direct investment. Many assume that a turn away from Xi Jinping’s “comprehensive” reform agenda could occur only alongside a diminution in his political centrality. Therefore, major market-oriented reforms are unlikely.
Nonetheless, there are reasons to believe that the Party leadership will exhibit a degree of flexibility at the Third Plenum. Positive rhetoric from authoritative Party outlets and modest stimulus measures unveiled in recent months indicate that next week’s reforms could exceed expectations. The Party’s leading journal, Qiushi, recently reprinted a 2013 quotation of Xi Jinping stating, “Only by focusing on the top priority of development can we deploy comprehensive reforms.”
It will be prudent to wait and see what specific reforms are announced and whether the government follows through on the Party’s directives. As in 2013, any announcements could stall during the implementation phase. Even so, early indications point to the fact that Beijing is seeking to stabilize market confidence to enhance its broader reform agenda.
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