"Reform' and the 3rd Plenum of the 18th Party Congress

November 12, 2013
China Business Intelligence
Yesterday, I wrote to a friend who asked me yesterday about the new "Reform" Plenum":
Be careful, and skeptical.
First, 'reform' is a feel-good word in the Chinese Communist lexicon,
like 'democracy' and 'rule of law.'  But those words don't mean the same
things to Party members that they mean to foreign commentators.  So,
regard any 'reforms' that come out of the current Party Plenum with a
gimlet eye.
Second, under Communist Party procedural rules, the Plenum will not make
significant changes in policy direction without 'unanimity or near
unanimity' among the leadership. This mitigates against any substantive
2013 is not like 1978 when the 'Third Plenum' (of the 11th Party
Congress), faced with an economy ruined by the Cultural Revolution, had a
broad consensus for massive reforms in order to delegitimize the maoist
ideology of the 'Gang of Four.'  China's economy in 2013 is thriving, and
no-one dares suggest that China needs real reforms or that any Party
leaders need delegitimizing.
This means that the consensus will prevail, and that any 'reforms' will
probably originate in the central-planning wing of the Party because the
central-planners -- who are centered in the Shanghai faction -- command a
pretty solid majority of the Central Committee.  The State-sector is
under the control of the Party Center in Beijing, and China's national
industrial policy is far easier to coordinate and unify the more the
economy is under the Center.
The so-called 'Reform' wing is not advocating so much for 'market forces'
as for more autonomy to the non-State sector that has its power bases in
the provincial and local party committees.
Also, everyone would like to see more attention paid to environmental
degradation, but it's the non-state sector that is the biggest source of
pollution.  Remember, under the 1997 'Three Represents' doctrine, the
'Red Capitalists' of the non-state sector were brought under Communist
Party discipline.  (Prior to that, the CCP did not encourage the property
class, the bourgeoisie, the 有产阶级, to come up in the Party. Now, all
China's billionaires are Party members).  I don't think they're in a
position to push for 'less' Central Party control over their activities -
they'll just dump more sewage into the water supplies and more soot into
the oxygen supply.
Consequently, the Party Plenum will not announce any real 'reforms.'
There could be a shift in the amount of flexibility there'll be in
currency policy, but it will certainly be one which keeps the Center with
firm authority over capital markets should things get out of hand.
Any 'reforms' will have to come from the orthodox central planning wing,
and that means the more you heaar the word 'reform' touted in this
Plenum, the less actual reform there'll be.
We'll know soon enough, eh?


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