China’s Third Plenum all about muddling through

Four days of highly anticipated high-level Third Plenum meetings (from July 15 to 18) among Chinese Communist Party leaders ended with a perplexingly vague readout.

Indeed, the anticipated meeting’s July 19 press conference failed to assuage China watchers’ general impression of a non-event, even if some 300 reforms were touted by the official Chinese media, most of which were already underway.

As the third plenum under President Xi Jinping’s guidance, expectations were running high for bold action. That wasn’t the case at his first plenum, in the spring of 2014, which could have only set the tone for his mandate so early after his appointment.

The second plenum under Xi, in 2018, focused more on amending term limits in China’s constitution to allow for his reappointment than reforms. This year’s plenum, on the other hand, was the first under an all-mighty Xi unbounded by term limits

It was also the first after the Covid pandemic, which has exposed persistent imbalances in the Chinese economy, not least the very low contribution of private consumption to economic growth.

It is also notable that since the first plenum under Xi, the external environment has deteriorated quite dramatically due to a much more aggressive US leadership, both under Donald Trump and Joe Biden.

The readout and press conference following the Third Plenum thus focused on how difficult the external environment has become for China while acknowledging three key domestic challenges, namely an ailing real estate sector, local governments’ debt problems and systemic financial risk.

Three measures stand out from the plenum’s vague readout: one, a push for more rapid urbanization through reform of rural versus urban land; two, greater centralization of