China’s Third Plenum: great expectations

“Take nothing on its looks; take everything on evidence”, wrote Charles Dickens in Great Expectations. The advice would have been well put to foreign observers who built up a cargo cult for reforms coming up at the Third Plenum of the 18th Chinese Communist Party Congress, which met from 9-13 November. The meeting could become a classic of social network hype and groupthink. When nothing substantial was apparently decided at last year’s Party Congress (except the pecking order among leaders – no small issue in itself), somebody remembered that at the beginning of the Deng Xiaoping era, it was the third plenary meeting of the party’s 11th Central Committee that had started China’s greatest wave of reforms.

When China’s national legislature held its once-a-year meeting last March, again not much happened. Expectations were shifted forward, to the next hurdle. And it was then that the myth of the Third Plenum was born. In spite of evidence regarding a generally tough political and ideological line, and in spite of many declarations to the effect that reform is a series of small steps, not a big leap, many partners of China – and above all, investors – want to see China ushering a second wave of major reforms. And if they can’t see it, they will indeed imagine it.

True, there were a few signs. One think-tank working directly under the central government and formerly associated with the World Bank’s “China in 2030” report, has created an ambitious blueprint for reform. And in spite of very respectable growth, there is much irony and discontent among the Chinese population, which chafes at authority and constantly pushes the envelope for more practical freedoms.

The resolution from the Third Plenum sets the record straight. It puts the party above all – the word itself appears 34 times, excluding the title for the document. It stresses again the public economy as the “core”, even though it gives equal time to the private economy. It talks about strengthening state firms – certainly not disbanding them. It specifically warns against “taking the evil road of changing the flag and switching banners”. The most noted announcement is the creation of a State Security Committee (official English translation for what in Chinese are the terms used for the US National Security Council), whose structure seems to come first under the heading of internal security rather than international issues. You guessed it, this will be a Party unit.

Indeed, Mr. Xi is a continuator, as he has repeatedly emphasised since taking power. Yet he is also a synthesiser for the great CCP family: the resolution pays lip service to Marxism-Leninism, Mao, Deng’s “seeking truth from the facts”, Jiang Zemin’s “Three representations”, and even Hu Jintao’s “harmonious” society, a concept that had been largely forgotten in recent months. The two concrete innovations from the plenum are designed to streamline and improve the government’s decision process, not to revolutionise China. In an interesting comment, the head of China’s official foreign policy think-tank has said that China’s new National Security Council (NSC) will concern itself with the Three Evils (terrorism, separatism, and religious extremism) and will serve to co-ordinate international strategy where it most matters: maritime issues, which remain divided up among various actors.

The other innovation is the establishment of a “leadership small group for comprehensive and deep reform”, again under the party. Aficionados will recall the heyday of the “tigaiwei”, China’s Economic Reform Commission, a government organ that occupied a key role under Prime Minister Zhao Ziyang and was disbanded after 1989. The word “comprehensive” appears 21 times in the plenum resolution. Again, the need for an overarching and synthetic authority, above China’s diverse agencies and special interests, is obvious.

Therein lies the only hope for change, which will be measured against reality when the first decisions after the plenum are announced. There is overabundant evidence that Mr. Xi’s dream for China excludes political reform as such. Mr. Xi is procedural above all. And he separates politics from economics, unlike Deng Xiaoping, who, in spite of the “Four principles” of party rule he set in 1979, also stressed political reforms and liberalisation or “emancipation” of the mind. Deng was also confusedly messianic about the road to market. The expectations he set in motion in 1978 served his own political dynamic and neutered the conservatism of the party’s top leadership for a decade, until 1988. Not so with Mr. Xi, who sets out on his journey by stating its limits – where he will not go.

This might be called truth in advertising. Deng’s dramatic turnaround in 1989, the King Lear-like destruction of his two reformist heirs (Hu Yaobang and Zhao Ziyang), has broken China’s political culture. Mr. Xi’s initial terms are easier to maintain. Some expected from him a disbandment of giant state enterprises and their special interests, which were rebuilt in 1998 by a leader, Zhu Rongji, whose disciples work in the present government. There have been expectations of large social reforms with huge political implications (the abolition of the residence permit for former peasants above all), or of currency convertibility. These hopes are now put back in time. Interestingly, the plenum’s resolution says nothing about China’s international stance. It seems to be Mr. Xi’s private domain, with his chairmanship of the Military Affairs Commission now doubled by the new NSC.

Mr. Xi will now attempt to do exactly what liberal critics, and many economists, say is impossible to do: establish careful, top down yet incremental reforms while preventing any political extension of these reforms and even preserving the party’s “mass line” (mentioned twice), e.g. the ability to stage campaigns against political threats. How he will contain expectations, including from the rural folks he vows to bring up to speed with city dwellers, remains a mystery. How will he discipline official corruption, limit state corporate privileges and the huge gains of China’s upper middle class is even more mysterious. Yet because Western democracies are not in tiptop shape, and because no other emerging economy does as well as China, he still has a fighting chance to demonstrate to a majority of his compatriots that this is as good as it gets – faute de mieux, of course.