China will strike a balance

In China, the third plenum of the Central Committee of the Communist Party of China of the 20th convocation completed its work. A resolution was adopted on the comprehensive deepening of reforms and modernization. China will continue reforms "through openness" and maintain a balance between economic development and security, the communiqué said.

It is emphasized that the current socio-economic policy is a continuation of the policy of reform and openness: "Openness is a striking feature of Chinese modernization. It is necessary to steadily adhere to the policy of openness to the outside world, continue to stimulate reforms by expanding openness, and create a new system of economy with a higher level of openness".

The period of Xi Jinping's rule is designated as "a comprehensive deepening of reforms in a new era" (until 2024, this wording was not used).

The plenum called for the construction of a strong modern socialist state. The need to strengthen the national security system was emphasized. The improvement of the armed forces is called the most important component of the modernization of China.

What is it supposed to mean?

The PRC considers it necessary to adhere to an independent and peaceful diplomatic course. "Modernization with Chinese characteristics is modernization that follows the path of peaceful development", the document says. "It is necessary to firmly adhere to an independent and peaceful foreign policy, to contribute to building a community of common destiny for humanity".

China will build on "significant market advantages", "expand international cooperation and build a new high-level open system". China should adhere to the principle of self-confidence and self-reliance, the theoretical journal Qiushi noted, publishing before the plenary session a selection of articles by the Chairman of the People's Republic of China, General Secretary of the CPC Central Committee Xi Jinping.

It is easy to guess that Beijing is forced to respond to unfavorable external conditions associated with Western policy. The President of the People's Republic of China noted that "China's problems should be solved by the citizens of the PRC themselves. What is it supposed to mean?

When your main trading counterparties openly declare that you are no longer their friend, but that they feel threatened, that they are not ready to feed their partner with their technologies.

As in relations with Russia, the West in the case of China does not exclude options for concerted actions to close markets, withdraw its enterprises, hide technology, and impose sanctions. In some places this is already happening. Donald Trump and James Vance confirmed such intentions at the Republican Party Congress in Milwaukee, where they were instructed to lead the struggle for control of America until 2030.

The communiqué of the plenum of the CPC Central Committee noted the readiness to support an equal and orderly multipolar world, inclusive economic globalization. At the same time, China will protect its national sovereignty, security and the right to development. "China will maintain a balance between economic development and security", the communiqué said.

Solve problems yourself

China is preparing to respond to the challenges associated with changes in relations with the West. At the 20th CPC Congress in 2022, a "New March" was proclaimed for the next 13 years to achieve "universal prosperity". By that time, the dependence of the PRC economy on foreign trade had decreased. The share of exports in GDP fell from 36% in 2005 to 20.7% in 2022.

The West is not only preparing to impose sanctions and waiting for crisis shocks in China. The NATO alliance and its partners are ready to exert forceful pressure on Beijing. Trade barriers are multiplying, the parties are suffering losses. Foreign direct investment in China in the first five months of this year fell by 28% compared to the previous year. In 2023, the IMF estimated that fragmentation and trade restrictions could cost the global economy $7.4 trillion.

In 2023, China's GDP growth reached 5.2%, it is planned to keep this figure within 5%, which is a lot given the scale of the economy. And although according to forecasts of the International Monetary Fund (IMF), by 2029 the growth rate may decrease to 3.3%, China has long surpassed the United States in terms of economic volume.

The CCP is increasingly paying attention to "new qualitative indicators of the development of productive forces", pushing for the development of such areas as biotechnology, hydrogen energy, quantum computing. Scientific and technological self-sufficiency is becoming a priority. The Chinese lunar probe delivered soil samples to Earth from the far side of the moon.

Chinese-made aircraft began to operate commercial flights. Chinese electric cars have literally upended the global car industry thanks to advances in battery manufacturing. Capital flows from infrastructure sectors to areas such as green energy and semiconductors.

Respond to challenges

In China, they know about their problems - debts of local authorities and "illiquids" in the real estate sector, weak domestic demand. The share of the construction sector in GDP is more than 25%. Issues such as taxes, pensions and investments were on the agenda of the plenum. Today, the retirement age is 55 for women who worked in the office, and 50 for working professions, 60 for men. The share of people over 60 is about 20%, by 2030 this category will be up to a third of the population.

Data on China's GDP growth for the second quarter did not meet forecasts (4.7%), although exports grew. Shanghai's SSE Composite Index is down 6% from its May high, while its annual numbers are little changed. An index of mainland Chinese-listed stocks fell more than 10%.

In 2020, severe restrictions were imposed on developers, which led to a lack of funding for some of the largest players. In May 2024, prices for new homes in 70 cities in China fell 4.3% compared to last year. Prices for secondary housing decreased by 7.5%.

The decline in the real estate market is seen as a brake on domestic demand. A more than $40bn funding programme is in place to encourage local governments to buy unsold homes and convert them into affordable housing. The requirements for the down payment have been reduced, the lower limit on mortgage rates has been canceled. Political support for the real estate sector could breathe new life into the stock market.

"Socialist instincts"

At the third plenum of the 11th Politburo in 1978, CPC leaders made the historic decision to move from class struggle to modernization and economic reforms. The foundations of a "policy of reform and openness to the world" were laid. The key direction in solving the problems of modernization then became the West. In 1993, the plenum on economics approved the concept of a socialist market economy. In the outcome of the 2013 plenum, it was noted that market forces should play a "decisive" role, but the dominant role of state-owned companies was confirmed. In 2018, the third plenum focused on reform of party and state institutions.

Having come to power at the end of 2012, the new leader of China stated: "Either the Communist Party will defeat corruption, or corruption will defeat the Communist Party". The decisions of the XIX Congress of the CCP in 2017 included the slogan "Firmly remember the original ideals, continue the march forward!" A long-term plan for the "great revival of the Chinese nation" by 2049 has been put forward.

Some Russian experts believe that Xi Jinping was expected to display "deep socialist instincts" reinforced by ideology.

"We must adhere to our strong faith in Marxism, in socialism with Chinese characteristics, our self-confidence along the way, our confidence in theory, in our system, in our culture, and make a new contribution to the development of Marxism", wrote People's Daily these days.

The model of "socialism with Chinese characteristics" is based on the coexistence of socialist planned and capitalist market economies, the development of which is regulated by the Communist Party in the long-term interests of the country. Before the pandemic, the private sector provided 60% of GDP and the same share of taxes, as well as 80% of jobs. At the same time, the public sector ensured the manageability and sustainability of the national economy, and turned out to be less dependent on world market conditions during the pandemic and trade war.

Over the past ten years, under the leadership of Xi Jinping, the incomes of about 100 million local residents have crossed the poverty line, the PRC is recognized by the UN as a country where there is no more poverty. At the same time, China has a middle class of 400-500 million people. As the party publication People's Daily notes on its website, "there has never been a textbook, let alone a ready-made response, that would help the Chinese people and the Chinese nation move from the bitter experience of new history to the bright prospects of a great revival".