Looking Ahead to the Third Plenum

One of the top decision-making bodies of the Communist Party of China (CPC)—the Central Committee—will hold a plenary session, or plenum, in July. This will be the third plenum held by the current Central Committee since it began its five-year term in 2022. Originally expected to take place in the last quarter of 2023, the highly anticipated third plenum will likely introduce important updates to China’s reform agenda. The heightened interest in the meeting also stems from the confluence of challenges the country is currently facing, ranging from intensifying geopolitical tensions to its slowing growth momentum. 

The Historical Significance of Third Plenums

The convening of plenums has traditionally followed a set pattern. Third plenums have typically taken place in the last quarter of the year following the CPC National Congress (held every five years) and tend to focus on matters related to economic development and reforms. Several third plenums in history have had a far-reaching impact on economic policymaking. The third plenum of the 11th CPC Central Committee in 1978, for example, marked a pivotal shift in China’s development, as it saw the country move away from “class struggle” and take initial steps towards economic reform and opening. The third plenum of the 14th CPC Central Committee in 1993 firmly established “building a socialist market economy” as China’s reform goal, allowing for the initiation of more meaningful economic reform measures. 

Third Plenums and Reform Under Xi

With Party Secretary Xi Jinping at the helm, there have been both changes and continuity in the third plenum agendas. While Xi has continued using the sessions to advance reforms, these have gone beyond the economic arena. A key priority for Xi during his presidency has been “comprehensively deepening reform,” which was the theme of the 18th CPC Central Committee’s third plenum in 2013 and encompasses reforms in six key areas, including economy, politics, ecology culture, society and Party governance.  

Comprehensively deepening reform will feature in the upcoming third plenum, with such efforts to be further strengthened, according to the readout from the CPC Politburo’s April meeting. The plenum can therefore be expected to remain broadly in line with the principles and key areas of reform already prioritized by Xi, particularly since the 20th Party Congress in 2022. These include high-level goals such as promoting high-quality development and building a high-level market-based economic system.  

Potential Topics on the Plenum Agenda

Some recent high-level meetings chaired by Xi provided several indications of the probable plenum agenda, both in Xi’s speech and the selection of guest speakers. These included a symposium held in Shandong province in May and the latest meetings of the Central Commission for Comprehensively Deepening Reforms (CCCDR). Xi highlighted a wide range of topics, from supporting innovation and the private economy to improving the people’s livelihood. 

• Restoring Consumer Confidence 

A close examination of China’s economic performance over the past few years suggests that a lack of investor and consumer confidence is one of the most pressing economic issues facing Beijing. While the high-tech and services sectors, as well as exports, have remained resilient and contributed to overall growth in the wake of the pandemic, a series of challenges have been dragging on growth and present significant risks to the economy. These include a troubled real estate market, significant local government debt, weak private investment and slower-than-expected consumption growth.  

The upcoming plenum is expected to address critical issues such as employment, income growth, education, health care and housing. Improvements in these areas should help to bolster consumer confidence. Additionally, the Party may deliberate on implementing land and household registration reforms to enhance demand and labor supply—a key issue given China’s aging population.  

• Support for the Private Sector 

The plenum is also likely to feature pledges of increased support for China’s private sector. As the most innovative segment of the Chinese economy, the private sector accounts for over 60% of the country’s GDP and 80% of urban employment. In addition to market access barriers and difficulties accessing funding, China’s private enterprises have been grappling with tightening regulations and a slowing economy in recent years. The plenum resolution will likely seek to restore business confidence, with a focus on ensuring legislative support and leveling the playing field between private and state-owned enterprises.  

• New Productive Forces 

Amid intensifying U.S.-China technology competition, Xi has been urging the country to develop “new productive forces” (NPFs), which essentially refers to new growth patterns enabled by technological innovation. The third plenum is expected to further highlight the role of NPFs in guiding China’s future development, spanning both the cultivation of new industries (such as the digital economy and AI) and upgrading traditional industries. Notably, “developing venture capital investment and strengthening patient capital”—a recurring topic in recent high-level Party meetings—will also likely feature at the plenum, as well as goals to promote innovation through opening and integrating into the global innovation network, as noted in the fifth CCCDR meeting. 

• The Future of Economic Opening 

Reiterating support for foreign businesses and pledges to further open up to foreign investment can also be expected. The primary goals in this regard will continue to be increasing market access and shortening the negative list for foreign investment, as well as deepening high-level institutionalized economic opening. These goals are consistent with Party and government pledges over the past few years. However, despite recent efforts to expand market access for foreign investment in certain areas, China will likely maintain a strategic and selective approach, prioritizing national interests and utilizing foreign resources to achieve Beijing’s development priorities. 

Meaningful Change?

Most of the goals discussed above, including boosting innovation and supporting foreign businesses and private enterprises, are not new. Progress on these issues to date has been mixed. While the CPC has reiterated its intention to deepen comprehensive reform, key questions remain. China observers will be watching to see if upcoming reform measures are sufficiently bold and actionable to bring about meaningful changes, and whether they will allow China to develop sustainably while fending off external and internal risks.