China Is Holding a Major Meeting on the Economy That You Can’t Watch

[Pelican Press 0]

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China Is Holding a Major Meeting on the Economy That You Can’t Watch

Xi Jinping, China’s leader, and 370 or so other ********** Party officials are meeting in Beijing this week, away from the public eye, to review a plan intended to shake the world’s second-biggest economy out of its malaise.

Mr. Xi will sit in the front of a conference hall, most likely in the

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, a 60-year-old institution with *******-style architecture. The party loyalists arrayed before him are near certain to acclaim his plans during the four-day meeting that

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and will consider a draft proposal on “further comprehensively deepening reform.”

******** media have sought to create a buzz around Mr. Xi’s plans, but the real test may come later, as any changes in policy filter through the layers of government. Success or ******** will largely turn on whether Mr. Xi is able to win renewed confidence from the ******** population, as well as foreign investors who have grown disenchanted with his policies.

China’s businesses and consumers have suffered in recent years through stumbling growth, a property sector meltdown and a blight of debt among local governments. On Monday morning, China released data that showed a sharp slowdown in economic growth.

“A lot of uncertainty feeds into very low consumer sentiment, very low investor sentiment,”

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, a former World Bank country director for China, said in a talk this month about the meeting. “This is a point in time where China needs to show its cards.”

Party leaders are orchestrating the conclave — a so-called Third Plenum of the Central Committee — as a stage to promote what Mr. Xi calls “high quality” growth. In recent history, Third Plenum meetings, named for their place in the five-year cycle of committee sessions, were when ******** leaders like Deng Xiaoping ignited enthusiasm for their modernization goals.

China has many, many factories. It is building even more.

Provincial governments and national ministries have been rushing for months to announce how they want to carry out Mr. Xi’s latest economic slogan: harnessing “new quality productive forces” to achieve more sustainable growth.

In practice, that has meant building factories. China already produces almost a third of the world’s manufactured goods, but is making a further push. Among its plans, China intends to deploy more robots and other automation to offset a shortage of workers willing to toil in factories.

The solar panel, electric car and battery industries, all favored by the government these days, are replacing older industries more closely tied to the real estate sector, like steel and cement manufacturing.

Xi is talking up the private sector. Will companies believe him?

While Mr. Xi’s enthusiasm for high-tech growth is clear, he has been ambivalent about the role of foreign firms and China’s own private businesses. They will look for new incentives or assurances when the Central Committee meeting unveils the party’s goals.

“The real question is to what degree does this Plenum shift the balance between the state and the market,” said

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, a fellow at the Asia Society Policy Institute. Regulatory crackdowns bruised China’s tech giants and other private firms, leaving investors doubtful about whether Mr. Xi saw a place for them in his plans.

Since last year, when China’s slowdown began to hit hard, he has been talking up the

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. But these companies will be looking for more than pats on the back from the party meeting.

“Xi can talk a big game about making life easier for foreign investors and private firms,” Mr. Thomas said, “but if they don’t see anything change on the ground, then it’s all for naught.”

What will it take to get ******** consumers to start spending?

Mr. Xi’s hopes for an economy built on artificial intelligence and automation will have a shaky foundation unless China can deliver more opportunity to workers and farmers. Without improved ********, health coverage and old-age care, many ******** people will remain reluctant to spend more.

China’s leaders have recognized the consumption problem for decades. But for all of China’s economic advances, including its recent push in electric cars, many people earn and spend little. One outcome is that China relies heavily on overseas markets for sales, generating tensions with countries that absorb surges of exports.

Several years ago, Mr. Xi promised to give priority to “common prosperity” — narrowing China’s wealth gap — and the theme may return at this week’s meeting. Zhang Bin, an economist at the ******** Academy of Social Sciences, who

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, wrote recently that the government should make “promoting social justice” a pillar of policy.

But municipal officials, especially in big cities like Beijing and Shanghai, have long resisted a crucial measure that would help level the social field in China: pulling down barriers to household registration, or hukou, that make it hard for rural migrants to settle permanently in many cities, or even for urban residents to move between cities.

Smaller cities have tested relaxing hukou rules as they try to attract more home buyers and young workers. Still, such changes are only partial solutions. Medical and pension benefits and public schools are mainly the responsibility of municipal and provincial governments in China. Big cities, which provide much more generous benefits, are reluctant to bear these costs for newcomers. Mr. Xi has expressed wariness of ******** programs, warning they might erode the country’s work ethic.

Can Xi fix China’s shaky fiscal plumbing?

China’s success in building infrastructure over the past three decades was underpinned by a funding structure that is now losing steam. Finding a replacement, in a country where many are averse to paying taxes, is one of the party’s biggest challenges.

In the 1980s, local governments started selling long-term leases to the private sector for land that had been nationalized decades earlier. Officials used the proceeds to help pay for construction projects and public services.

But China’s housing market ****** has ruined many private developers, and government revenue from land sales plunged by a third from 2021 to 2023.

Fixing the fiscal plumbing is not easy. Many ******** people bought into real estate, seeing it as one of the few safe investments available to them, and they resist the idea of a nationwide property tax. For now, the Ministry of Finance has been helping indebted local governments borrow more. Possibilities for a longer-term solution include the national government sharing more revenues from various taxes, possibly including levies on gasoline or tobacco.

‘Great expectations’ for changes are unlikely to be fulfilled.

When the meeting ends on Thursday, the party leadership will issue a communiqué summarizing its decisions. If past meetings are any guide, any detailed proposals will be made public only days later.

Mr. Xi has been here before. He started a detailed program for reforms at a Third Plenum in 2013, but

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the promised economic and social changes remain incomplete. This time, experienced economists are tempering expectations of big changes in course from Mr. Xi.

“Many people have great expectations for the Third Plenum, looking toward another wave of reforms and major moves,” Yao Yang, a professor of economics at Peking University,

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to ******** business executives last month. “I want to tell you all that’s taking a lot for granted.”

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