China Third Plenum 2024
Red flags fly at Tiananmen Square in Beijing, China, on Wednesday, July 10, 2024.
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BEIJING — China’s leaders doubled down on boosting domestic technology in a high-level meeting called the Third Plenum that ended Thursday, according to a state media readout.
China must “adapt to the new round of scientific and technological revolution and industrial transformation,” an official English-language communique said. It also said China would “improve the new system for mobilizing resources nationwide to make key technological breakthroughs.”
The readout affirmed Beijing’s commitment to balancing development with ensuring national security, and did not otherwise reveal policy changes.
“This communique [shows China’s leadership] is staying the course in the sense it wants to avoid the worst but it’s not yet convinced the policies the U.S. has used is the best for China,” Liqian Ren, leader of quantitative investment at WisdomTree, said in a phone interview. She was referring to policies such as easy money with lower interest rates.
“That is the government’s calculation, that making progress in technology is the ultimate confidence booster for China, [that the] U.S. couldn’t use those technological bottlenecks to contain China,” she said.
State media said the meeting of the Chinese Communist Party’s Central Committee passed a resolution on “deepening reform” to “advance Chinese modernization.”
Details on the resolution are expected to be released in coming days.
“The outcome is in line with our expectations that the Third Plenum is a continuation of existing policy tweaks,” Tianchen Xu, senior economist, China, at the Economist Intelligence Unit, said in a note.
“I would highlight ‘innovation and managed markets’ as the top two keywords in the Third Plenum,” Xu said. “Innovation and productivity enhancements top all priorities, almost unexpectedly, amid the grand backdrop of US-China rivalry.”
Under the Biden administration, the U.S. has called China a competitor and sought to restrict Beijing’s access to advanced tech such as semiconductors in the name of ensuring national security.
Beijing meanwhile has pushed to develop high-tech domestically and address what it considers risky, overexpansion of the financial sector, especially in real estate.
Regarding the latest plenary meeting, “we think any market-oriented reform will be measured and carried out insofar as it doesn’t compromise national security,” Xu said. “We still hold high expectations for fiscal reform, although the communique was very brief about that topic.”
China says will meet full-year targets
The readout on Thursday said that China would work to achieve its full-year growth targets. The country in March announced a GDP target for 2024 of around 5%.
Beijing also said it would “actively” expand domestic demand, a term it has only used in some recent high-level meetings.
“Expanding domestic demand seems to be mainly focused on short-term economic policies,” Bruce Pang, chief economist and head of research for Greater China at JLL, said in Chinese, translated by CNBC.
“Other parts seem to pay more attention to the supply side than the demand side,” he said. However, he noted that efforts to further integrate rural and urban areas, living standards and fiscal and tax reforms are all helpful for expanding domestic demand.
Overall, Pang said, the readout reaffirms what has been shared in other meetings and speeches, indicating the key will be implementation of the policies.
The Central Committee of the ruling Chinese Communist Party, made up of more than 300 people including full and alternate members, typically holds seven plenary meetings during each five-year term.
The Third Plenum has traditionally focused on economic policy. Under Deng Xiaoping’s leadership in 1978, the meeting officially heralded significant changes for the communist state, such as China’s “reform and opening.”
WisdomTree’s Ren noted that this year’s plenum comes as China’s leaders have encountered a relatively new situation: slower economic growth and the majority of business coming from non-state-owned enterprises, which are less easy to control than state-owned companies.
“The thing is if they came out with a drastic policy and it didn’t work,” she said, “that downside is pretty high for a government like China.”
— CNBC’s Sonia Heng contributed to this report.
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