Why Did Xi Jinping Stick to His Guns at China’s Third Plenum?
Xi Jinping is sticking to his guns. As general secretary of the Chinese Communist Party (CCP), he presided over a Third Plenum last week that doubled down on his existing agenda, ignoring calls by many economists for market reforms, consumer stimulus, and demand-side growth. The outcomes largely corresponded with the Center for China Analysis’s modest expectations.
Of course, the plenum was not all bad news. The Central Committee’s “decision,” which should guide policymaking for years to come, contains over 300 reforms across 60 sections and 15 topics, including anticipated but positive measures to address central-local fiscal imbalances, enhance innovation, and reduce urban-rural divides. But why did Xi not seize the opportunity to make bolder changes? Why did he ignore domestic and foreign calls for a course correction given anemic confidence, inadequate consumption, and rising trade frictions?
Several official sources related to the plenum shed light on what happened behind the scenes: Xi’s “explanation” of the decision, the “record of creation” for the decision, and “side notes” from the four-day event. These documents suggest three things about Chinese politics that help explain Beijing’s current economic strategy: Xi believes his approach is the correct one, Xi thinks his main problem is poor execution, and Xi increasingly discourages internal policy discussions.
Xi believes his approach is the correct one. In the explanation, Xi pinpoints his five “focuses” in the plenum decision. The first focus is on the “leading role of economic system reform,” the “main task” of which is to build institutions that promote Xi’s longstanding platform of high-quality development, which prioritizes qualitative improvement over quantitative growth. He says that the decision “centers on the core issue of handling the relationship between the government and the market,” even though he values executives and investors as policy tools rather than as animal spirits. A second focus on “comprehensive reform” aims to align policies in other domains with high-quality development.
Another focus is on “integrating development and security,” as Xi clarifies that the decision “puts the safeguarding of national security in a more prominent position,” ending hopes of a rebalance toward development. A focus on “building institutions and mechanisms to support comprehensive innovation” underlines the primacy of education, human capital, and science and technology reforms for Xi’s push to secure China’s supply chains and growth potential from perceived Western threats.
The final focus, on “strengthening Party leadership,” reaffirms Xi’s view that centralized power improves government performance. The record of creation says that a “distinctive feature” of the decision is that it “pays more attention to system integration” by “strengthening the overall planning” of reforms, thereby ensuring “greater cohesion, synergy, and efficiency.” The decision essentially proclaims that Beijing will have a more visible hand in ensuring that all parts of the economy move toward Xi’s desired ends.
Xi thinks his main problem is poor execution. The side notes from the plenum state that the Party “already has a relatively clear picture of the top-level design aspect of reform” and should now concentrate on “overall promotion and supervision of implementation.” In other words, Xi is now firmly in control of central decision-making, but he still feels that local officials, state bureaucrats, and business executives are not doing what he tells them to do.
At the Third Plenum in November 2013, there was some dissonance between the decision, which raised expectations for market liberalization, and the explanation, wherein Xi saluted the Party’s active role in the economy. This year, these documents are more closely aligned and show the extent to which Xi has eliminated the need to compromise with other leaders.
However, despite introducing “high-quality development” at the 19th Party Congress in October 2017, Xi is unhappy with its progress. In January, he complained that cadres with “inadequate understanding,” “old-fashioned concepts,” and “insufficient ability” were holding back his agenda. The five-year deadline to execute the present decision, compared to the seven-year time frame in 2013, is likely an effort to focus the Party on implementation.
Xi increasingly discourages internal policy discussions. In May the plenum drafting team circulated a draft decision to cadres, retired leaders, satellite parties, and policy experts. They received 1,911 suggestions and made 221 revisions. In comparison, the drafting team for the 2013 decision received 2,564 suggestions and made 539 revisions, meaning this plenum saw a 25% fall in suggestions and a near-halving of their acceptance rate from 21% to 12%. Cadres are less willing to speak, and Xi is less willing to listen.
The record of creation for the 2013 decision states that Xi “chaired several plenary meetings of the drafting team,” while the more recent one only says that he reviewed drafts and gave instructions. The drafting team, which numbered over 70 people, compiled opinions from central leaders and conducted interviews with provincial and ministerial officials that were then submitted to Xi. These facts suggest that Xi is increasingly secluded from lower-level officials and less interested in policy debates.
As in 2013, Xi served as the leader of the drafting team, and his deputies included the first secretary of the Party Secretariat (now Cai Qi) and the executive vice premier (now Ding Xuexiang). But this year’s team included an extra deputy, the chairman of the Chinese People’s Political Consultative Conference, Wang Huning. Wang’s unusual presence proves that he remains Xi’s top ideologue and reflects the intellectual continuity of this Third Plenum with Xi’s second term. Political control and technological prowess were key themes of Wang’s past work as a neo-authoritarian thinker.
What do these three features of Chinese politics suggest about Beijing’s economic policy after the Third Plenum? Continuity is a key theme, with Xi convinced that he must use his authority to implement what he already views as good policy. The positive measures mentioned above could bring genuine achievements, such as more sustainable public finances from better tax regimes, higher productivity from moving up the value chain, and even greater consumption from rural dwellers able to sell land rights and access urban public services.
Yet political will and bureaucratic capacity decide which reforms in a lengthy plenum decision see meaningful advancement. Xi’s explanation suggests that national security and technological innovation will attract disproportionate resources, which could hamper reforms aimed at household consumption, private investment, and foreign trade. Greater pressure to deliver results could undermine execution by further disincentivizing experimentation, dispiriting officials, and distorting feedback. Policy debates within China may become progressively less influential on the top leadership.
Xi is clear on where he wants China to go. It is unclear what could change his mind — perhaps an economic collapse that decisively discredits his policies, though that seems unlikely. Likelier is gradual stagnation that exacerbates social instability and political uncertainty. For now, we must search for actions rather than words. If future laws, work conferences, and five-year plans can dispel widespread disillusionment about unfulfilled promises, Xi’s plans might even work.