Beijing astrologers have been waiting for this for a long time. After being postponed several times, the third plenary session of the Communist Party Central Committee was now held for the 311 elected members. Since Deng Xiaoping pushed through the turnaround in favor of his reforms at such a conference at the end of 1978, strategic decisions have never been ruled out at Communist Party plenary sessions. In 2013, for example, shortly after President Xi Jinping took office, a “far-reaching major reform” was announced at a plenary session that proclaimed “common prosperity” as the goal, but has not yet been fully implemented.
China’s international reputation is now based on its position as a leading industrial and global trading power. Whether it will be able to catch up with the USA militarily in the foreseeable future depends on whether the country can overcome its largely home-made deficits. Growth rates are the least of the problems, as they are significantly higher than those in the USA or Europe and match the level of development that China’s economy has reached. What is pressing for a solution is the real estate crisis, the consequences of which are noticeable everywhere. Rising youth unemployment, stagnating private consumption, the financial difficulties of the provinces and cities, and the Chinese over-saving are all related to this. In addition, there are obvious regional disparities between east and west, south and north. The exodus from rural areas, which goes hand in hand with rapid urbanization, is leading to millions of migrant workers.
The popular panacea of growing out of the crisis is working less and less because the trade wars with the USA and now also the EU are throttling China’s export opportunities. Russia and other BRICS states cannot even come close to replacing rudimentary sales markets. There was and is a very open, and sometimes public, discussion in China about the consequences. There was a discussion in the run-up to the July plenum – members of the Central Committee, not least Xi Jinping himself, took part. Managers and scientists were involved, as well as leading universities. Anyone who followed the preparations for this plenum knew that some elementary reforms were being discussed.
“Hukou system” to be abolished
From the official communiqué of the Central Committee meeting It is now clear that private consumption is to be increased, in line with the already agreed move away from one-sided export-oriented growth. The talk is about setting up and expanding the Chinese welfare state. So far, social benefits for average and low-income earners in China have fallen far short of European standards. In the coming years, the Communist Party wants to add tax-financed social benefits such as unemployment benefits, pension payments and free healthcare to social insurance as a basic security. To provide a basis for this, this plenum of the 300 decisions made, not all of which have been published, promised extensive industrial policy measures. They are to benefit a high-tech industry in order to establish “Made in China” as a seal of quality worldwide. China is to become or remain the world market leader, particularly in the solar industry.
In addition, the long overdue financial and tax reform will probably be implemented, and quickly. After all, the real estate crisis has brought provincial and local governments to the brink of bankruptcy. These administrations can no longer service their debts because they have lost their important source of income – the sale of land to developers and speculators. In this respect, a great deal of reforming energy is needed to bring about real financial equalization in favor of poorer and less developed regions. It is worth noting that this can only be at the expense of the central government and will strengthen the autonomy of the provinces and regions.
In addition, the outdated “Hukou system” is to be abolished, which acts as a first-class barrier to mobility and fragments China’s domestic market. Up to now, anyone who moves to another city or province without good reason is not registered as a resident there and thus does not have access to kindergartens, schools, old people’s homes and hospitals. Late, but not too late, the Communist Party has realised that there is no help for migrant workers and that youth unemployment cannot be reduced without abolishing this completely obsolete control system.
