BEIJING — China’s ruling Communist Party will begin a four-day meeting on Monday that is expected to lay out a strategy for self-reliant economic growth in an era of heightened concerns about national security and access restrictions to American technology.
While the meeting typically focuses on long-term issues, business owners and investors will also be watching to see if the party announces any immediate measures to try to counter a crisis. prolonged real estate crisis and a persistent discomfort that has repressed China’s post-COVID-19 recovery.
“There is a lot of lack of clarity in the policy direction in China,” which is weighing on consumer and investor confidence, said Bert Hofman, former World Bank country director for China and a professor at the National University of Singapore. “This is a time when China needs to show its cards.”
The outcome of the meeting will send a message to local government officials and others about the future direction of policy. The general expectation is that it will confirm the path laid out by Chinese leader Xi Jinping, although some expect some adjustments to be made to address concerns that increasing government control over business and society is stifling economic growth.
The 205-member Central Committee of the Communist Party is holding its third plenum, or the third plenary session of a five-year term that began in 2022. This year’s meeting was expected to be held last year, but was delayed .
Historically, important economic and political decisions have been adopted at this third meeting, although not always. Analysts say the plenary session often sets long-term directions that impact the economy.
1. In 1978, the meeting endorsed former leader Deng Xiaoping’s “reform and opening up,” the transformation from a planned economy to a more market-based economy that fueled China’s growth in the decades that followed.
2. In 1993, he endorsed a “socialist market economy” that sealed the victory of reformers fighting conservatives who warned of the dangers of economic liberalization.
3. In 2013, in another support for the reformHe said the market would become the decisive force in allocating resources.
The latest pronouncement, made a year after Xi became leader, did not come to fruition. Within a couple of years, the party began to backtrack before heading in a new direction in 2017, Hofman said.
Under Xi, the Communist Party has decided that it must be at the center of efforts to take China to the next level of development. China is now the world’s second largest economy, but with a population of 1.4 million people, it also remains a middle-income country.
The government has reined in China’s high-flying tech giants such as fintech and e-commerce giant Alibaba. As the United States became more adversarial, Xi pressured Chinese companies and universities to try to develop high-end semiconductors and other technologies that are blocked by US restrictions on exports to China.
Free market advocates worry that this government approach is discouraging entrepreneurship. Another concern is that the growing importance of national security will affect economic growth. Government has investigated companies that transferred economic data abroad in what appears to be an increasingly broad definition of what constitutes a violation of the law.
A major change of direction is not expected and would be momentous if it occurred. Instead, the degree to which the meeting acknowledges concerns about the business environment and national security could indicate whether there will be some policy adjustments.
Increased support for high-tech industries seen as vital to national security and future growth is almost certain, along with related industrial policies.
But the party faces demands on other fronts. Alexander Davey, an analyst at the Mercator Institute for China Studies in Germany, said they are looking at how the government will balance two main prerogatives: economic growth and social equity.
Local governments are deeply in debt and several cities suspended transportation services because they could not afford to continue operating. In February last year, the city of Shangqiu, home to more than 7 million people, close bus lines.
“There may be a small change: does the central government issue more debt to local governments so that they can manage their services?” Davey said. The trade-off will be between vast resources invested in scientific and technological development, areas considered vital for national security and social services.
Investors will be watching for signs that the government, having increased its control over the economy, will take steps to create a more favorable environment for private companies.
Then, there is the Real-estate market. In April, the government announced policies that marked a shift in its approach to financing direct purchases of unsold homes.
“A notable change in China’s real estate position in the first half,” Yifan Hu, chief investment officer for Greater China at UBS bank, said in a statement. “This current pressure underscores the need for additional easing, which we believe will come given the supportive political tone.”
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Wu reported from Bangkok.
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