China to hold Third Plenum this month, will it focus on reforms or Xi Jinping's long-term vision?

The Communist Party of China (CPC) will hold the Third Plenum this month after unexplained delay of several months.

The Third Plenum, which refers to the third annual conference of top CPC leaders in the regime’s five-year term, will be held on July 15-18. Such gatherings have previously come up with major reforms and policy pivots. The upcoming conference will also be closely watched by world leaders, commentators, and investors and businesspersons.

The Third Plenum is taking place at a time when China is facing an escalating trade war with the United States and the West. It is also facing issues at home as the economy is reported to be slowing and the real estate continues to be on a slope. The Joe Biden administration of the United States has also sought to restrict China’s access to advanced semiconductors and deal blows on its electric vehicles (EV), metals, and renewable energy industries.

What we know of China’s Third Plenum?

Not much is yet known about the agenda of the upcoming Third Plenum. The stated goal is to “further comprehensively deepening reform”, according to Barron’s magazine.

In May, in few hints that have come from Chinese leaders, President Xi Jinping said the conference “must focus on the theme of promoting Chinese-style modernisation”.

Then, last week, the CCP’s second-highest body, the 24-member Politburo, announced that the conference would feature a “resolution on comprehensively deepening reform and advancing Chinese modernisation” with the objective of building the Chinese the nation into a “high-level socialist market economy” by 2035, according to Bloomberg.

These are generalist statements that do not offer precise insights into what’s in the offing. Amid such signals, China observers have said that the conference may not announce any ‘big bang’ reforms for the immediate course-correction for Chinese economic or trade issues but may instead reassert the long-term vision of Xi and brainstorm how to go about fulfilling the long-term goals of Xi.

Historically, the Third Plenums have chalked out the policy outlook for the next five years of the Chinese leader at the time. Xi, who is in his unprecedented third term as the leader and is effectively the leader for life, continues to have the unquestioned support of the party and is no need to assert his rule. So, at the level of political leadership, he has enough room to run his writ. That’s why the Third Plenum may go for brainstorming over his long-term vision instead of short-term hiccups.

“Expectations are low so I don’t think it’ll create too much more negative surprise. I have no confidence to bet on [any big stimulus],” said said Xin-Yao Ng, the Director of Investment at abrdn, to Bloomberg.

What are investors & business hoping for?

Even though the Chinese leaders don’t appear to be bringing any immediate reforms, the investors and businesses have their hopes — even if against odds.

The Bloomberg reported that they have been hoping for the Chinese leaders to look into the issues of supply chain security. They are hoping for this area to be addressed as the US policies are seeking to choke access of chips, chipmaking machinery, talent, etc to China.

The report further said that investors and businesses have also been hoping for rural and urban reforms, taxation reforms, and an ease from the yearslong crackdown of Xi’s regime on the private sector.