For the last few decades, a key item to mark on calendars is the Third Plenum of each Party Congress. A Congress last five years before a new set of people are elected or chosen or anointed to be part of the party’s central committee and each year of the five there is a plenary session at which major policies are considered, or rather announced. The Third Plenum in each cycle has always been reserved for economic policy related announcements. There should have been one last year, but there wasn’t, the assumption being that there was a lack of unity on what to actually say.
It was recently announced that the Third Plenum of the 20th Congress will be held in July. That means, given the way the Chinese system works, that it has also been decided what to actually say, that some formulation about direction of policy that will set the tone for the forthcoming five years has been agreed. The question, then, is what is it? The two strands of discussion are national security and economic development, and Those in Command have been pushing for the past decade to stress “security” as well as control over development. The most recent example of this was the economic policy conference in December last year, in which the two were neatly balanced, with “security within development, and development within security” being the takeaway message. It would be an understatement to say that the markets, the middle class and investors, not to mention the ordinary people, are looking for something more concrete with regards to the possibility of economic policy, and clearing what increasingly feels like a logjam.
If there is a plan to announce a significant shift in policy direction at the Third Plenum, then it would be reasonable to assume that related signaling would already be taking place. And while there have been a slew of policy announcements relating to the local property markets and to other issues, there is nothing which really stands out so far as an indicator of something fundamental to come. The economy is not in good shape and overall people seem to be looking for something substantial to restore confidence that a return to the general sense of opportunity unfettered which characterized the Deng era will be forthcoming. Between now and the July Plenum, it is a waiting game.
Meanwhile, the leader, Mr. Xi made his first trip to Europe in four years, thereby highlighting the divergence within Europe as to how to handle the relationship with China. Divide and rule is always a favored strategy, and Europe lays itself open to such an approach. Meanwhile, the export of EVs to Europe continues to surge. The US is expected to soon announce controls on EV imports, and the German and French auto industries are going to get whacked if they don’t do something too.
Overall, this year is shaping up to be increasingly a nail-biter. But pace yourself. Don’t chew them all off at once. And have a great weekend.