International Forecaster Weekly

The Third Plenum of China

As is the way of such things, there has been no formal agenda released to give any forward indication of what will be discussed at the gathering this weekend. Speculation is rife that it will follow the “3-8-3 plan,” a roadmap drawn up by various government think tanks in recent years.

James Corbett | November 6, 2013

Late last month the Chinese government announced the dates for the Third Plenum meeting. The much anticipated gathering will take place from November 9th to the 12th in Beijing.

            For those who don't know, the Third Plenum is (as the name suggests) the third plenary session of the Chinese Communist Party under new President Xi Jinping. Although it doesn't sound particularly important or impressive, the Third Plenum has gained a reputation for being the meeting at which major changes in direction for the Chinese economy are announced.

            The 1978 Third Plenum of Deng Xiaoping's government was where the infamous gaige kaifang, or opening up of the Chinese economy started. Buckling to a wave of popular protest against Mao's cultural revolution, the 1978 gathering repudiated the Maoist politics-before-economy mantra with the so-called “four modernizations” intended to revamp China's agriculture, industry, national defense, and science and technology. This was the beginning of the transformation into the hybrid socialist/market economy it is today.

            The 1993 Third Plenum under Zhu Rongji saw that process continue and deepen. The 1993 meeting, technically the 13th Third Plenum, formalized the socialist market economy, paving the way for more private business and reform of the Chinese fiscal and banking sector. It also reformed the state-owned enterprise sector; state-run businesses declined from 10 million before the meeting to less than 300,000 by the mid-1990s.

            As is the way of such things, there has been no formal agenda released to give any forward indication of what will be discussed at the gathering this weekend. Speculation is rife that it will follow the “3-8-3 plan,” a roadmap drawn up by various government think tanks in recent years. The 3-8-3 plan has the aim of transforming the Chinese economy (again) by 2020, and it gains its moniker from its numbered proposals: three broad based reforms; eight target areas for specific change; and three breakthroughs to be achieved. The three broad reforms are enterprise reform, government reform, and market reform. The eight target areas for change are: liberalization of interest and exchange rates, promoting innovation in technology, land reform, the introduction of social security, cutting bureaucratic red tape, promoting competition, reforming state-run enterprise, and opening up the services sector. The three breakthroughs to be achieved include lowering market barriers, setting up social security, and allowing trading of collectively-owned land.

            It remains to be seen if the ambitious plan will be proposed in its entirety or if it will be introduced piecemeal. It furthermore obviously remains to be seen whether such a transformation can really be implemented, especially as the Chinese economy continues to cool off from its formerly blistering pace of growth. But considering the distance that China has come in the past 30 years of reform, it is at least conceivable that a transformation of this scale could be attempted by Beijing. Regardless, all eyes will be on China this weekend as the world's soon-to-be largest economy hunkers down to chart its course for the next decade.