Signals of Third Plenum-Insights from Key Economic Official
Signals of Third Plenum-Insights from Key Economic Official
Reading of Han Wenxiu's article published in the Communist Party's flagship journal, Qiushi (求是)
3rd Plenum has been a hot topic on China watchers overseas. Many are looking for reform signals through official papers and reports. Han Wenxiu, Executive Deputy Director of the Office of the Central Financial and Economic Affairs, published an article on Qiushi- the flagship journal of CPC. The article named “Promoting high-quality development through deepening reform.” I think it leaves us with some traces to follow because, first, he is the “top” deputy director and ministerial-level official. Second, this commission is critical to coordinating high-level policymaking on economic and financial topics.
Zichen has published his excerpts, and they are definitely a must-read. I will use his version of the translation and go deeper.
The key points of Han’s article contain six areas for reform.
Deepening Reform in the Systems and Mechanisms for Education, Science, Technology, and Talent, Promoting Innovative Development, and Accelerating the Construction of a Modern Industrial System.
In official definition, “New Quality Productive Forces” are led by technological innovation. The logic follows: "To foster technological innovation, we must reform the education system to cultivate and attract talent. With more advanced technology, we will be able to establish a modernized and more efficient industrial system."
It is worth noting that while emphasizing the importance of innovation, Han also underscores the significance of traditional industries.
Developing new quality productive forces should not neglect or abandon traditional industries, but must use advanced and applicable technologies to transform and upgrade traditional industries. The development of new quality productive forces in various regions should be based on actual conditions, avoiding blind conformity and bubbles,
To me, this part is echoed in Xi’s reply during his inspection tour in Jinan Shandong province in May, which I mentioned in an early newsletter. That’s what he said:
We should not only focus on the new energy vehicles, lithium batteries, and photovoltaic products. We should not have a sudden upsurge, a sudden rise, and a sudden dispersal. We must adapt measures to local conditions, as each has its own merits.
Deepening the Implementation of the Main Functional Area System and Comprehensive Reform in Agriculture and Rural Areas, Promoting Coordinated Development, and Accelerating the Formation of a New Pattern of Urban-Rural Integration and Regional Coordinated Development
China has a political heritage that emphasizes the rural and agricultural sectors. For the rural reform, Han remains focused on promoting the urbanization of citizens transferred from rural areas, deepening the reform of the household registration system, and promoting the coverage of basic public services for permanent residents in urban areas.
Deepening the Reform of the Ecological Civilization System, Promoting Green Development, and Making Green and Low-Carbon the Basic Color and Future Advantage of Chinese-Style Modernization
Ecological enhancement has been a critical aspect of Chinese policymaking since Xi Jinping's era. What I find interesting in this regard is that while acknowledging the importance of decarbonization, Han actually stressed the significance of coal in China's energy landscape. He used the phrase "先立后破" (xiān lì hòu pò), which means "establishing the new before abolishing the old," to express his reservations about some local governments' rushed plans for decarbonization.
The concept suggests a gradual, measured approach to transitioning from traditional energy sources to cleaner alternatives.
We must both stand on the basic national condition of coal-dominated energy and insist on establishing the new before abolishing the old, making good use of coal and coal-fired power as a bottom-line guarantee, while also deeply advancing the energy revolution….我们既要立足以煤为主的基本国情，坚持先立后破，发挥好煤炭和煤电的兜底保障作用,也要深入推进能源革命….
Improving the System and Mechanism of High-Level Opening-Up, Promoting Open Development, and Facilitating Domestic and International Dual Circulation
He emphasized the “dual circle” of the economy. For the internal market, he emphasized the importance of breaking administrative barriers and artificial obstacles. Basically, promoting healthy competition by eliminating local protectionism. For the world market, he strengthened further opening up, but no specific areas were mentioned.
Deepening Reforms in the Field of People's Livelihood, Promoting Shared Development, and Continuously Enhancing People's Sense of Gain, Happiness, and Security
It’s mainly about increasing social welfare. What I didn’t expect is it also mentioned childbirth welfare.
Establish and improve the fertility support policy system, reduce the cost of childbirth, upbringing, and education, strive to achieve a moderate fertility level, and strive to achieve high-quality population development.
Improving the System and Mechanism for Secure Development, Effectively Coordinating Development and Security, and Achieving Positive Interaction between High-Quality Development and High-Level Security
After dedicating two paragraphs to discussing the relationship between development and security, Han added a final, concise paragraph that I believe encapsulates his key point in this section.
Promoting high-quality development requires both effective qualitative improvement and reasonable quantitative growth, focusing on achieving reasonable economic growth, full employment, stable prices, and a basic balance in international payments. We must strive to keep major economic indicators within a reasonable range, and continue the new chapter of the "two miracles" of rapid economic development and long-term social stability.
That paragraph is more lean to the development side. Emphasizes that maintaining relatively high GDP growth rates remains critical. (Natural for a deputy director of the Central Financial Office)
Other than the goal of reforms, Han also made four requirements for local governance in the last section; they are
It is essential to make steady progress while maintaining stability and avoid being impatient for quick results or rushing headlong into mass action. (Isn’t that similar to the requirement in the first area of the previous section?)
Secondly, we must adhere to putting quality first and prioritizing efficiency while preventing the blind pursuit of quantitative scale without considering objective conditions and in violation of laws and regulations.
He further mentioned:
"We must persist in promoting the continuous and healthy development of the economy by improving quality and efficiency, pursuing a real and solid gross domestic product (GDP) without any inflated figures. We must prevent regions from comparing and competing with each other, or even successively raising their targets. We must guard against blindly rushing and falsifying data for the sake of economic growth, and even more so, we must prevent draining the pond to catch fish or burdening the people and wasting resources. We need to come up with practical measures to achieve real results, adhere to laying a solid foundation for long-term benefits, and steadily push forward the economy to realize effective qualitative improvement and reasonable quantitative growth.
This paragraph just reminds me of Professor Zhou Li-an's “promotion tournaments” theory. It’s a theory explaining local officials' incentives and governance.
Thirdly, we must adhere to the development of the real economy and prevent the tendency to shift from the real to the virtual economy.
Fourthly, we must adhere to the principle of establishing the new before abolishing the old and prevent the tendency of abolishing the old before establishing the new.
Adjusting policies and promoting reforms should be carried out in an orderly, coherent, and seamless manner, as it is impossible to achieve success overnight. We must grasp the right timing, degree, and effectiveness, adhere to the principle of establishing the new before abolishing the old, and proceed steadily and firmly. We should make full preparations, formulate detailed plans, strengthen expectation management, and prevent 'one-size-fits-all' approaches or 'hard landings'.
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