China's mysterious Third Plenum
- 12 November 2013
- From the section Business
China's mysterious Third Plenum has ended much as it started:
With a brief word from the official Chinese media that the meeting had begun and now a short communique announcing its conclusion.
Among the few phrases in the short communique, the key ones are "comprehensively deepening reform" and "crossing the river by feeling stones".
The reference to "comprehensive" reforms fits with the billing in the Chinese state media that this meeting of the top Chinese Communist Party officials will result in significant reforms under the new president and premier during their decade in power.
The details of their economic policies are scant from the communique. In the coming weeks and months, the official media may divulge more at the whim of the Chinese leaders.
So far, allowing the market to play a "decisive" role in the economy has emerged as a message in the state media.
This sums up the aims of the Chinese leaders which is to introduce more market forces into the economy. It would be key to achieving the "breakthrough" reforms that were discussed in the "383" plan that was circulated by the government's top think tank beforehand, which I wrote about before.
The three "breakthrough" reforms involved reforming capital markets, labour in the form of improving social welfare, and land.
Basically, the factors of production all need reform and much of it requires raising productivity in order to support growth.
Now, that's no easy task for any economy, much less one where powerful state-owned enterprises dominate the financial sector and key parts of the economy.
So, the devil will be in the details as to how these reforms will be implemented. And those are lacking.
But, the invocation of the phrase, "crossing the river by feeling stones" is a deliberate echo of the 1978 Third Plenum which ushered in the reform era.
The story goes that the phrase is attributed to Deng Xiaoping. When he was asked how he planned to introduce market forces into the centrally planned economy and achieve his reform aims under such difficult circumstances, he reportedly said that it's by "crossing the river by feeling stones".
In other words, step by step in a pragmatic manner is how big reforms are ultimately achieved in China.
It's worth bearing in mind that China's economic reforms under Mr Deng were considered gradual and not radical. It's in contrast to the radical dismantling of the command economy that much of the former Soviet Union undertook.
But, in retrospect, the 1978 reforms were transformative.
By invoking the spirit of Mr Deng's reforms, President Xi Jinping and Premier Li Keqiang are perhaps signalling that, in time, their multi-pronged reforms will be similarly transformative as China faces the next era of growth.
But, for now, we are likely to mostly hear disappointment over the lack of transparency of the economic policies of the world's second biggest economy which has implications for the rest of the world.