As the third plenum (三中央会) of the Chinese Communist Party's (CCP) 18th Central Committee (中央委员会) opens this week in Beijing (9-12 November), the world will watch as China's 5th generation leadership once again takes center stage. Attendees of this exclusive four-day elite strategic policy planning meeting, comprised of the 376 members of China's Communist Party Central Committee along with a number of other prestigious invitees, will convene one of the most significant administration meetings of any CCP leader in his first term. It is in this key series of meetings that the senior most leader of the CCP—state President & party Chairman, Xi Jinping (习近平)—will set Beijing's economic compass for the next five years.
Leading up to this prominent policy meeting, there have been many in China who have vigorously debated the merits of a variety of potential economic reform possibilities. Some of these include: charting important sectoral reforms to allow for greater privatization, degrees of financial liberalization to loosen capital controls and encouraging greater domestic consumption to facilitate a larger domestic market. Many of these economic reform ideas are captured within the State Council's Development & Reform Research Center "Plan 383 (383方案)." This plan, which was drafted by the influential Harvard-educated Chinese Larry Summers-equivalent, Liu He (刘鹤), and now a principal Xi economic policy advisor, outlines a tiered approach to possible reform.
The plan, which incorporates many of the World Bank "China 2030" recommendations, is primarily economically focused and is broken into "three key themes," "eight key areas of reform" and "three breakthrough areas." Fundamentally, Plan 383 provides the Chinese leadership with an economic reform roadmap and a variety of related policy choices, with each choice facilitating pathways of varying degrees of economic reform. Key aspects of this plan focus on China's next generation economic evolution—proposing ways to grow the Chinese economy away from an export-driven, state-heavy enterprise model to one that is more market-normalized. Ideally, this will move China's economy towards one more like that of the United States, which integrates more consumer-driven consumption and small-to-medium enterprise (SME) contributions to overall economic growth.
While much of the focus of the third plenum has traditionally been on economic reform—this year's third plenum anticipates a slew of evolutionary economic reforms beyond those normally seen. These reforms include the possible breakup of the monopolies held by the 113 state-owned enterprises (SOEs, 央企), greater land rights for farmers, localized taxation authority and a number of other needed economic liberalizations. However, as in all political systems, the key challengers to any major policy change are Xi's leading cohorts within the CCP elite, who may see any reform as altering the status quo and cutting into their own personal vested interests. While it is difficult to anticipate what will transpire, many of the long-touted economic reforms required to spur growth could finally begin to be implemented at this plenum. Xi, however, will walk a fine line, since many of the market reforms needed are ones that will potentially expose the party elite or its member's families to more scrutiny under the rule of law.
Based on strong statements by Xi ("To manage state affairs according to law, first we must run the country in accordance with the Constitution.") and others (e.g. "China's Dream is the Dream of Constitutional Government, 中国梦宪政梦"), this plenum could set the course towards some degree of legal or political reform, including a closer alignment between party leadership and the Chinese constitution. However, these sorts of reforms will not occur immediately, nor necessarily be keenly obvious to party outsiders; changes will probably be subtle and obscured in new economic regulation. Xi is balancing a double-edged agenda comprised of tightening party controls (e.g. Document 9, 中办发[2013] 9号) and coaxing an evolutionary economic agenda. As party chairman of the CCP, new economic policy will provide Xi with the ability to enforce new party rules of the game at his discretion— ideally enabling him to free-up economic growth and instill additional party discipline as he sees fit.
To understand why Xi is positioned to undertake reform in China, one must understand his familial background. First, Xi Jinping has a much more pronounced "red" princeling, party credentialed background than that of his predecessor Hu Jintao (胡锦涛). Xi's father, Xi Zhongxun (习仲勋), was a first-generation Communist Party leader and one of the founders of the Communist guerrilla movement in Shaanxi Province. This connection to the beginnings of the party provides Xi with strong CCP leadership party bona fides along with a naturally close relationship with the military. Secondly, Xi has served as provincial governor in a number of coastal provinces—Fujian, Zhejiang, and Shanghai—which gives him a first-hand understanding of the key economic challenges facing China's changing economic environment and the need for market-oriented reforms. This dynamic background provides Xi with much more party credibility and authority than some rivals, and affords him an unusual ability to potentially foster and implement difficult economic reforms.
The policy choices Xi charts in this coming week's series of meetings will potentially have profound impacts on how China will engage with the world and govern itself internally. Whether economic reforms enacted will include the beginnings of legal reform needed to incrementally subject the party to the Chinese constitution or the rule of law, remains to be seen. However, it is possible that as Xi has aggressively attacked corruption domestically to provide for greater party credibility, he could similarly envision the need to sow the early seeds of political reform in order to facilitate greater confidence in the Chinese economic system. As Xi Jinping prepares to chart the future of the CCP in the coming decade, changes masked under the auspices of strong party discipline, needed legal changes and economic reform within the third plenum, could be an integral part of the historic reforms being planned with Xi ultimately signaling—via reforms—to a bolder commitment to the "Chinese Dream (中国梦)."
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Wes Andrews is an Afghanistan war veteran and former diplomat. He holds an MA in international affairs from SIPA at Columbia University, and an MBA in international management from the Monterey Institute of Int'l Studies. As a freelance writer, he can be reached via Twitter @Wes_Andrews.
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