Economy

Decisive wording

Third Plenum produces brief communiqué and much speculation

CHINA-REFORM

Under wraps: plenum communiqué lacked detail

We know a lot about what goes on behind the scenes in US politics. That’s in large part thanks to gifted journalists who spend years researching books about presidencies and political campaigns. In a recent example, Double Down: Game Change 2012, authors Mark Halperin and John Heilemann spoke to 400 of the key players that contested last year’s race for the White House.

The result is a fascinating account of Barack Obama’s battle to get re-elected and the equally riveting inside story of how Mitt Romney prevailed in the Republican primaries but lost the general election. Private conversations between the protagonists are a regular feature. For example, when Romney is feeling threatened by Jon Huntsman’s chances of winning the Republican ticket, his chief strategist Stuart Stevens tells the candidate: “Mitt, don’t even think about it. The two words Republican voters hate the most are ‘Obama’ and ‘China’. And this is a guy who has been working for Obama in China. It’s absurd.”

It sounds like Obama was equally sceptical about Huntsman’s chances. He told his own campaign guy David Plouffe that of all the GOP challengers, Huntsman was “the sanest of the group” but added: “How could that be an asset in seeking the nomination of this Republican Party?”

Books like Double Down and Mark Leibovich’s This Town offer masterful insights into how Washington works, as well as the thinking of the players that shape the US policymaking agenda. But there has never been a book about contemporary Chinese politics that is even remotely comparable. Very little news of the gameplaying and gossip among China’s political insiders ever reaches the public realm.

There was little sign of the situation changing this week, as newspaper editors struggled to detail exactly what went on at the Third Plenum earlier this week.

The 370 or so attendees number some of the most powerful people in the country. But what they said to each other is never likely to emerge. If America has one of the most transparent political cultures in the world, China is stuck resolutely at the opposite end of the scale.

The four-day event – flagged in advance as the most significant gathering of its type for years – produced a short communiqué so lacking in policy outcomes that the content was pored over by the media commentariat for its linguistic nuance. Great significance was awarded to the mention that market forces would play “a decisive” role in allocating resources, for instance. Why? Previously, the word “basic” had been used. This, it was suggested, could be interpreted as a victory for the laissez-faire faction pushing for a more open economy.

But some international media were disappointed. “After a long wind-up, Xi delivers anticlimax,” was the view of the Wall Street Journal’s China columnist Andrew Browne, while another of its articles was headlined: “Chinese meeting finishes with decisively vague plan”. The newspaper acknowledged “encouraging promises to improve farmers’ land rights and to rationalise dysfunctional tax and budget systems” but added that the statement reaffirming the “dominant role” of state-owned companies in the domestic economy looked like a victory for vested interests at the state firms over those who’d like to see them pared back.

HSBC’s China economist Qu Hongbin agreed that the absence of SOE reforms was the “key disappointment” of the Plenum but said too that there were several positives. Qu thought there were “hints” that “a comprehensive reform plan” will be released at a later date, with at least three surprises: “It will address the sensitive issue of income distribution; will ensure that the judicial system at the local level is independent of local government interference; and will set up a central committee to coordinate and supervise the implementation of reforms.”

Bill Bishop, who runs the popular Sinocism blog, was also upbeat. He said of the communiqué: “If you have a more negative bent you can easily read it as just more bureaucratically paralysed boilerplate. If you want to take a more positive view, I think you can find the possibility for aggressive reform within the very ambiguous language of the document. I will guess that this document is going to lead to significant reforms that will play out over the next few years.”

The UK’s Telegraph newspaper also saw significance in the event, commenting that “Xi Jinping has tightened his control over the Communist Party, emerging with new powers to sidestep his government and force through change.”

It also suggested that the creation of two new organisations should “boost” Xi’s power. One is a security council (likened by the Telegraph to America’s NSC) which “grabs power from the Central Committee and from the Politics and Law Commission”.

The other is a smaller body that will concentrate Xi’s power over the economy, reporting directly to him “in order to push policies past a bureaucracy that looks increasingly ossified and resistant to change”.

State news agency Xinhua described the new economic group as “a team in charge of designing reform on an overall basis, arranging and coordinating reform, pushing forward reform as a whole and supervising the implementation of reform plans”. In case you missed it, its mandate is reform…

The Financial Times deemed these two bodies to be the most concrete outcome of the secretive plenum: “The potent new councils are an implicit acknowledgement from the leadership that the current Chinese governance system can no longer effectively implement top-down policy measures in the world’s second largest economy.”

The newspaper even drew a historical comparison for why Xi might view such changes as necessary. “In particular, the establishment of a national security council is reminiscent of a similar move by the Qing Dynasty’s Yongzheng emperor who established an ‘Office of Military Secrets’ in the eighteenth century to cut through the bureaucracy and push through his policies.”

The FT’s suggestion is that policies dictated from Beijing are routinely ignored or subverted by local governments.

Here, the US and Chinese political systems do have something in common. The recent shutdown and debt ceiling drama in Washington highlighted how American governance has been damaged by partisan zealotry. But the Chinese system has its own version of gridlock. As China expert Ken Lieberthal told the FT: “There tends to be an impression outside China that this is a seamless authoritarian system and when the leadership says jump everyone jumps, but that is a very unrealistic view of how the country works.”

The competing layers of local and provincial governments, the rise of powerful ministries, government fiefdoms and state-owned companies – as well as factional infighting within the Party – all contribute to a political background in which the top leaders can struggle to enforce their will.

It’s an environment that favours the status quo – which, in turn, fuels sceptics’ doubts that fundamental changes are really afoot.

On the other hand, the South China Morning Post reports that we may get more concrete details of the plenum’s deliberations very soon. It cites a senior government source as saying a longer communiqué will be released within a week, containing more policy information.

While we wait for that, WiC offers its last bash at speculation, with one further observation. Earlier this week Xinhua published a photo of Xi addressing the plenum. And in the pictures he seems to have streaks of grey hair, a notable break from past practice in which leaders routinely dye their barnets black. We’ve already commented on Zhou Xiaochuan’s decision to go ‘grey’ (in issue 186). But what should we make of Xi’s own hairstyling choice? Given Zhou’s reputation for pushing for economic reform, could Xi be signalling that he is of similar mind? Or is he going grey for the purposes of gravitas, searching for the personal authority to bend others to his will? Of course, there’s always the chance of something more mundane, like Xi forgetting to bring a bottle of dye to the conference…


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