The upcoming 20th Third Plenum of the Chinese Communist Party (CCP), which has been delayed for nearly ten months, is expected to be held on July 15th to discuss economic and political policy measures for the next five to ten years. Overseas observers have expressed pessimism about this meeting.
Since the beginning of summer, widespread flooding has occurred in southern and central China. On July 5th, a breach in the embankment of Dongting Lake in Huarong County, Hunan Province, resulted in a major social disaster and economic loss. Wu Guoguang, a former advisor to Zhao Ziyang and political commentator, wrote on Voice of America on July 12th, stating that the Third Plenum is being held amidst a situation of deep crisis in China under the leadership of Xi Jinping.
Wu Guoguang mentioned that under Xi Jinping’s rule, the governance capacity of the CCP authorities has been continuously declining, contributing to the disasters caused by floods affecting the people, and also a reason for the difficulties faced by the 20th Third Plenum of the CCP.
According to the article, there is growing discontent within the CCP system towards Xi Jinping. Before the Third Plenum, Xi Jinping is expected to escalate the anti-corruption campaign and demonstrate his strong control over the CCP military to enhance intimidation and control over CCP officials. In the first half of this year, 36 senior officials above the deputy minister level in China were investigated, which is about a 64% increase compared to the same period last year.
Wu Guoguang believes that for fallen officials, it is a dire situation, but for Xi Jinping, it is an opportunity to consolidate and showcase his power. The former situation precisely reveals the dilemma faced by the latter.
Regardless of the innovative measures that may be introduced at the upcoming 20th Third Plenum to make people believe in Xi Jinping’s vision, according to Wu Guoguang, the spiral effect between high centralized power and governance crisis cannot be escaped from by him and his regime, leading to a normalization, institutionalization, and generalization of the crisis.
Historically, Third Plenums have mainly focused on economic reform, with the CCP officially claiming that this meeting will introduce significant measures for “deepening reform” but stressing the need to “uphold the overall leadership of the Party.”
Prominent activist and political scholar Wang Dan raised three critical questions in an article on July 11th. Firstly, with the highest principle of upholding the Party’s leadership in place, what reforms can actually be implemented? Wang Dan argues that genuine reform in China requires breaking free from the situation where everything must be dominated by the Party. Secondly, he questions how the principle of “putting the people at the center” can coexist with the Party’s leadership. Lastly, he challenges the notion of upholding the unshakeable socialist system while promoting institutional innovation.
Wang Dan concludes by stating that there should be no illusions about the so-called deepening reform discussed at the Third Plenum.
Prior to the Third Plenum, China is dealing with challenges such as weak consumer demand, overcapacity in production, and allegations from the US and EU about Beijing flooding foreign markets with cheap goods, distorting trade, and impacting global markets. The US has initiated new tariff actions across various products, from steel and aluminum to electric cars and solar panels. Recently, the EU also announced tariffs on electric cars.
At the same time, the Chinese economy is facing challenges ranging from a real estate market crisis to rising unemployment and weak consumer spending domestically.
According to data released by the National Bureau of Statistics of China on July 10th, the Consumer Price Index (CPI) rose by 0.2% year-on-year in June, the lowest in three months. In June, food prices dropped by 2.1%, but pork prices increased by 18.1% year-on-year. The CPI decreased by 0.2% month-on-month.
Economist Huang Dawei stated that if the impact of pork prices is excluded, the CPI in China is not just stagnant but shows signs of deflation, indicating declining consumer purchasing power and a decrease in economic activity and profitability.
In April this year, Beijing announced a plan for car and home appliance trade-ins, aiming to generate $29.3 billion in expenditure and boost China’s overall GDP by 0.5%. However, Alicia García-Herrero, Chief Economist for Asia Pacific at Natixis, mentioned that these schemes have not been very successful, with some subsidies disappearing due to concerning financial conditions at the local government level.
Leading up to the Third Plenum, authorities are emphasizing new rounds of fiscal and tax reforms. At the same time, tax investigation centers—known as “Police-Tax Synthesis Operation Centers”—have been established in multiple regions in China, with some private enterprises being subjected to tax investigations dating back 30 years.
Researcher Song Guocheng from the Center for International Relations Studies at National Chengchi University in Taiwan stated on Radio Free Asia that the key challenge facing this Third Plenum is addressing the issues regarding finances and taxes. He noted that now that the “Land God of Wealth” has fallen, the ability of the Third Plenum to confront China’s real crisis will reflect the CCP’s willingness to solve problems. Under systemic constraints and the decision-making disorder of individual leadership, the Third Plenum will focus on safeguarding the Party before rescuing the economy.
Senior political and economic scholar Wu Jialong asserted previously to media that the CCP authorities lack effective solutions to the economic challenges and have essentially given up on restarting economic growth, opting instead to focus more on maintaining political power than investment. What was initially meant to address economic issues at the Third Plenum has now shifted towards prioritizing security over development, with stability and control being deemed more important than investment.