Technological leadership, self-sufficiency, and national security dominate the economic policy framework laid out at the CPC’s Third Plenum

Roughly every five years, the Communist Party of China (CPC) holds one of its most important economic policy meetings. The third plenum of the CPC’s 20th Central Committee was held this year on July 15–17 in Beijing. The several hundred members of the CPC Central Committee were tasked with setting and approving the country’s medium-term economic policy directions and goals. This third plenum was held exceptionally late. It is typically held in the autumn, but this session was held over by more than half a year. Media speculation on possible causes for the delay included the possibility that China’s leadership was considering announcement of a major economic reform package. Such changes were never announced, however, as China’s leaders apparently decided instead to push forward with incremental measures in modernising the economy.

Looking at the big picture, the third session affirmed the central leadership’s intentions to continue and deepen existing economic reforms for the purpose of building a “high-standard socialist market economy.” The economic policy framework launched by President Xi Jinping focuses on technology, self-sufficiency, and national security – three themes woven through all of the 300 social modernisation programmes mentioned in both the official communique and modernisation resolution of the third plenum of the CPC’s 20th Central Committee.

Most of the major reforms fall into one of three categories: 1) private sector reforms, 2) measures to provide income security and assure productive livelihoods for citizens and 3) tax reforms. With respect to the first category, the plenary session committed to supporting private sector confidence through measures that include legislative amendments, reducing barriers to market access for domestic and foreign firms, supporting firms that pursue technological breakthroughs, as well as encouraging capital investment in strategic sectors. There are also a wide range of reforms intended to improve financial security. China’s leadership committed to supporting employment of young university graduates, reducing under-employment, reforming social security and the household registration system (hukou), resolving problems in the real estate sector, and improving rural living conditions. The leadership promised to find ways to let people who have relocated to cities from the countryside benefit from their rural property holdings (e.g. allowing them to rent out their rural properties or sell the land use rights). The resolution document mentions that “in line with the principle of voluntary participation with appropriate flexibility” the retirement age will gradually be raised, but without any further specification. Tax reforms include revision of the scope of local government taxation authority and reform of tax transfers between different levels of government, tax reforms to reduce inequality, as well as measures to reduce the “hidden” off-budget debt of local governments.

In accordance with tradition, the third session kept its goals at an aspirational level. Similar measures have been discussed for years, and none of the proposals contained any real surprises. How and at what level the proposed measures are implemented will only be revealed with the passage of time.