China needs to address its many economic challenges, as well as possible future opportunities in technological sectors.
The Chinese Communist Party gathered on Monday for its week-long “Third Plenum” in Beijing, a top-level economic forum the party hosts every five years. Roughly 400 CCP members, including China’s top leaders, will attend the meeting.
Historically, third plenums are when China enacts major economic reforms. The 1978 session, for example, is considered a turning point in modern Chinese history when then-Chairman Deng Xiaoping opened the country’s economy to the world. At the 2013 third plenum, Xi Jinping set the groundwork to dismantle the decade-long One Child Policy.
Xi Jinping remains China’s uncontested leader today after the party approved his historic third term in 2022. Many observers consider Xi the most powerful leader in China since Mao Zedong.
This year’s third plenum was postponed by several months at the end of 2023 when it was supposed to take place. The party gave no reason for the postponement.
According to CNN, most observers believe this third plenum will not result in sweeping reforms. Xi will most likely focus on the country’s several economic downturns, not least the disappointing GDP growth in the second quarter of 2024.
China’s economy expanded by 4.7% against the 5.1% forecast. That puts the country’s economic growth in 2024 at 4.8%, shy of the self-imposed 5% goal by the CCP.
Economy and technology
The Chinese economy is facing several challenges. The country’s real estate market is slowly collapsing as Chinese property giants default on their obligations. Real estate amounts to almost 25% of China’s GDP.
The real estate crisis started after property developer Evergrande defaulted on its offshore debt in 2021. Since then, the central government has refused to aid indebted developers, saying any company engaged in price speculation should “go bankrupt”.
However, the real estate crisis depressed Chinese consumer confidence. Domestic demand is extremely weak as monthly imports keep declining and deflation is rampant.
Moreover, local government debt reached a record-high $13 trillion, and youth unemployment measured 14% in June.
At the third plenum, Xi will likely announce immediate government measures to boost internal demand. The People’s Bank of China already approved somewhat limited aid packages to buy back unsold properties.
China’s economic return will also come from technological self-reliance. Many top CCP members lament excessive dependence on US technologies, especially in the digital and communication sectors.
Xi plans to turn China into a technology superpower, passing the US as the center of the world’s innovation. This is perhaps the most ambitious of Xi’s goals, especially without the economic growth needed to make it possible.
