Subscribe to China 5

THIS WEEK:

Decision on further deepening reform adopted at Third Plenum, Beijing plans to address demand woes with supply-side strategies, garbage time of history, new action plan for China’s aluminum sector, and tentative China-Philippines de-escalation agreement in South China Sea.

1. Decision on Further Deepening Reform Adopted at Third Plenum

What Happened: Following last week’s Third Plenum, the Chinese Communist Party adopted a “Decision on Further Deepening Reform to Advance Chinese-style Modernization.”

Risks and Challenges: The decision details major national reform tasks to be completed by the 80th anniversary of the People’s Republic of China in 2029. The plenum acknowledged the Party’s accomplishments under Xi’s leadership over the past twelve years and recognized that China is embarking on a new journey to develop a modern socialist country. However, it also reminded its 99 million Party members that China faces a period of simultaneous strategic opportunities, risks, and challenges, with increasing uncertainty and unpredictability.

Measured Solutions: The focus will be on the 300 reform measures outlined in the decision, which touch upon nearly every aspect of China’s politics, economy, science and technology, culture, environment, foreign policy, national security, and defense. One key area of focus will be industry and supply chain security. The plenum urged the Party to expedite the development of self-supporting and risk-controllable supply chains and enhance institutions and mechanisms to support key industrial chains like integrated circuits, machine tools, medical equipment, instruments, software, and advanced materials.

Why It Matters: In order to succeed, Xi is creating additional political incentives to rally everyone to align with his objectives. As a result, pressure on local officials and international partners engaging with China under Xi's leadership will increase. If everything goes according to Xi’s plan, by 2029, China will have economically decoupled from all actors who do not align with its policies and will have allied with those that do.

By Lobsang Tsering, Senior Research Associate, Center for China Analysis

Learn More: CCA Fellow on Chinese Politics Neil Thomas analyzes the outcomes of China's Third Plenum in his latest article, Why Did Xi Jinping Stick to His Guns at China’s Third Plenum?

2. Beijing Plans to Address Demand Woes with Supply-Side Strategies

What Happened: At the conclusion of the Third Plenum, Chinese officials conceded that the country’s economic recovery is “not strong enough” and called for more “proactive” measures to achieve the 5% GDP growth target.

Economic Pains: Beijing’s strategy focuses on breaking institutional barriers rather than relying on Western-style expansionary policies. Establishing a “unified national market” is essential to enhancing the flow of goods and services, thereby stimulating consumption. Fiscal system reform is critical for the financial health of local governments and addressing property market issues. Additionally, relaxing the hukou system aims to facilitate employment and boost demand through greater labor mobility.

Will It Work: Beijing is racing against time. While structural reforms and high-tech investment could lead to long-term growth, short-term risks are severe. Establishing a unified national market and reforming the fiscal system face significant bureaucratic hurdles. Likewise, relaxing the hukou system, though essential, is a complex and slow process. Further, property sector instability undermines consumer confidence, and geopolitical frictions could disrupt access to critical technologies and markets, thus complicating recovery.

Why It Matters: The Third Plenum, which usually focuses on long-term strategies, reflects to some degree the leadership’s recognition of current economic pressures. Xi Jinping’s mandate is to restore sustainable growth amid significant challenges, and his legacy hinges on these reforms. Beijing’s ability to navigate these challenges without further derailing the economy is crucial — and the jury is still out.

By Lizzi C. Lee, Fellow on Chinese Economy, Center for China Analysis

Learn More: Watch Lizzi, Neil, and CCA Senior Fellows Guoguang Wu and Bert Hofman discuss what Xi Jinping has planned for China after the Third Plenum.

3. Garbage Time of History

What Happened: The phrase “garbage time of history,” internet slang used to describe a period where a country’s economic or political situation has severely deteriorated to the point of irreversible failure, has recently gained popularity in China.

The Origin: The term originated in a September 2023 op-ed titled “Historical Garbage Time, Cultural Long Vacation” by Hu Wenhui, an editor at Yangcheng Evening News. It borrows from the sports phrase “garbage time,” which refers to a period in a game when the outcome is already decided and the remaining time is inconsequential.

General Ennui: The expression emerges during a period of economic challenges in China. Despite official data showing 5% GDP growth in the first half of the year, many media outlets considered the actual economic outlook less than positive. Chinese citizens face unemployment and poverty, consumers are reluctant to spend, and businesses are hesitant to invest. China’s three-year zero-COVID policy severely impacted the economy, and with criticism of the policy banned, young people have felt powerless and have instead opted for passive resistance, including via emigration.

Why It Matters: The state propaganda system and nationalists disavow the phrase. An initial repudiation op-ed was written by Wang Wen from the nationalist think tank Renmin University Chongyang Institute and published on Guancha.cn. This was followed by op-eds in Beijing Daily and on Xinhua. Ironically, efforts to denounce the term ended up popularizing it, expanding its reach from a niche circle of dissidents into the mainstream.

By Shengyu Wang, Research Assistant, Center for China Analysis

Learn More: Disillusionment with the Chinese government was noted by CCA Senior Fellow Lynette Ong when she covered the one-year anniversary of the White Paper Protests.

4. New Action Plan for China’s Aluminum Sector

What Happened: On Tuesday, the National Development and Reform Commission (NDRC) announced a special action plan for China’s aluminum sector.

Curbing Carbon: The NDRC action plan aims to save energy equivalent to 2.5 million tons of standard coal and to curb carbon dioxide emissions by a total of 6.5 million tons in the aluminum sector over the next two years.

The Particulars: The plan requires that, by the end of 2025, 30% of the production capacity of China’s aluminum industry be above the government’s energy efficiency benchmark, the proportion of renewable energy used in production be more than 25%, and the output of recycled aluminum reach 11.5 million tons. To facilitate implementation, the NDRC will rely on assistance from other government departments like the Ministry of Ecology and Environment.

Why It Matters: Aligning with policy set forth at the Two Sessions in March earlier this year, China’s latest action plan is a step in the right direction for achieving industrial sector decarbonization. Strategic plans and ambitious sectoral targets are crucial as China continues to work toward its 2030 and 2060 goals of peaking emissions and achieving carbon neutrality, respectively.

By Taylah Bland, Fellow on Climate and the Environment, Center for China Analysis

Learn More: Read Charting China’s Path to Its 2035 Nationally Determined Contribution by Taylah and ASPI’s Lauri Myllyvirta.

5. Tentative China-Philippines De-escalation Agreement in South China Sea

What Happened: China and the Philippines appeared to reach a temporary agreement on mutual restraint and de-escalation in the ongoing dispute at Second Thomas Shoal in the South China Sea.

Reducing Tensions: The agreement states that both countries will “jointly manage maritime disputes and reduce tensions.” It centers on Second Thomas Shoal, which has been the source of several recent skirmishes between the Philippine military and the China Coast Guard (CCG), including the CCG’s use of powerful water cannons to block supplies from reaching Philippine Navy personnel.

Divergent Understandings: On July 22, China’s Ministry of Foreign Affairs issued a readout of the agreement, stating that China is “willing to allow the Philippines to send living necessities to the Philippines personnel living on the warship if the Philippines informs China in advance.” The Philippine Department of Foreign Affairs replied, declaring that the principles of the agreement “were reached without compromising national positions” and that the Chinese proclamation on prior notification was inaccurate. The statement ended by saying “we emphasize that the agreement was done in good faith” and the Philippines “remains ready to implement it.”

Why It Matters: The differing statements reflect the agreement’s tenuous nature. China’s statement might have undermined the Philippine position, but it reflects Beijing’s long-standing diplomatic approach of balancing a desire to de-escalate disputes while maintaining its reputation domestically. While the practical effect of the agreement is uncertain, it suggests that the two sides are willing to explore mechanisms to build trust and avert crises.

By Lyle Morris, Senior Fellow for Foreign Policy and National Security, Center for China Analysis

Learn More: Read about how Chinese popular opinion shapes the outcomes of geopolitical crises in the Indo-Pacific in an issue paper by CCA Fellow Andrew Chubb.