Welcome to the 220th edition of Trade War.
The much-anticipated Third Plenum doesn’t deliver much on economic reform. Security given equal role with development in communiqué. And China’s second quarter GDP misses expectations, growing 4.7%.
Weak household consumption continues to be a drag on economy. And a new meme expressing frustration over limited opportunity refers to China as being in the “garbage time of history.”
Trump brags about getting a “beautiful note” from Xi Jinping and says Taiwan should pay the US for defending it. JD Vance has a long record of attacking China. And the vice presidential candidate’s plan to end support for Ukraine in favor of protecting Taiwan could embolden China.
Notable/In depth
What Trump called his ‘historical trade deal’ with China has been a failure
China’s leaders steering economy in a more ‘techno-nationalist direction’
Longtime former Beijing businessperson and author Anne Stevenson-Yang explains why she can’t return to China
Third Plenum doesn’t deliver much
The much-anticipated Third Plenum has come and gone, after initially being delayed for almost a year, and it didn’t deliver much. While some had hoped for an announcement of sweeping economic reforms, that did not happen.
As outlined in the communiqué released on July 18, the Third Plenum called for reforms but on China’s terms—not the market-opening policy shifts many in the West first think of, but instead changes more focused on strengthening the political system and the power of the Party.
“This isn’t Western-style market liberalization; it’s about reinforcing China's existing strategy,” says Lizzi Lee, a fellow on the Chinese economy at the Asia Society Policy Institute.
“The document cements Xi’s governance approach and his brand of reform, which focuses on consolidating power rather than adopting new liberal economic paradigms,” she adds.
The Party aims to accomplish its reform goals by 2029, the 80th anniversary of the founding of the People’s Republic of China, while “building a high-standard socialist market economy in all respects” by 2035, the communiqué said.
And the “fundamental guarantee” for reforms is ensuring the Party and especially China’s top leader, are in charge, the document states.
“We must uphold Comrade Xi Jinping's core position on the Party Central Committee and in the Party as a whole and uphold the Central Committee's authority and its centralized, unified leadership,” it continued.
But while the Party wants, as it puts it, a “centralized, unified leadership,” one that is able to more strictly manage China’s transition, that is a problem.
“Tightening control is at the heart of [Beijing’s] dilemma because in order for the reforms to work, they need to loosen control,” Dexter Roberts, a nonresident senior fellow at Atlantic Council’s Global China Hub, told VOA by phone.
Here is the full text of the English version, of the communiqué, and here the (more authoritative) Chinese version.
“Xi’s strident emphasis on the importance of security”
“As expected, the communiqué . . . highlighted high tech as well as reiterated Xi’s strident emphasis on the importance of security—something that has spooked both foreign and private investors before. China must achieve a ‘healthy interaction between high-quality development and a high level of security,’ the document stated. And while it name-checked important areas like strengthening consumption and the need to improve ‘basic and bottom-up livelihood,’ there were few specifics about the path ahead,” as I write in the in the Atlantic Council’s latest Global China Newsletter.
A more detailed, longer document will come shortly in the shape of the Third Plenum “resolution.” But even if it lays out what comes next with more specificity, don’t get your hopes up too high. After all, Xi Jinping’s first Third Plenum in 2013 promised ground-breaking reforms to China’s economic system but few were implemented. As I wrote at the time—and have mentioned in Trade War more recently—China faces a “central paradox“: its leaders say they want to pursue major reforms as a way to spark new drivers of growth but “by pursuing these reforms the party is diluting its control.”
Read more about China and its evolving international relations in the July edition of the Global China Newsletter, including how Hungary’s far-right leader Victor Orban has become one of Xi Jinping’s biggest supporter (Putin and Trump are among Orban’s other favorite leaders, with the feelings apparently mutual), and how China is propping up Russia’s war machine. (See China-Russia trade chart below):
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