China’s Plenary Session Won’t Offer Genuine Change – Analysis

By Qian Lang, Huang Chun-mei, and Man Siu Ping

The ruling Chinese Communist Party kicked off a three-day top-level meeting on Monday amid promises from state media that major reforms will be used as a "magic weapon" to take the country in a new direction, yet Chinese commentators say they expect more of the same from party leader Xi Jinping.

"Reforms and opening up will continue, and a new chapter will be written," party mouthpiece the People's Daily promised in a 10,000-character editorial published as the party's Central Committee began itsthird plenary sessionof Xi Jinping's third, and indefinite, term in office.

"With this important magic weapon, China's economy and society have undergone tremendous changes," the article said. "Today, China's total economic output exceeds 126 trillion yuan, ranking second in the world. It has built a moderately prosperous society in all respects, significantly improved its overall national strength, and opened its door wider and wider, becoming the main engine of global economic growth."

But the rhetoric is unlikely to result in major reforms, with officials more likely to be focused on boosting revenue forcash-strapped local governmentsvia taxes levied on consumption, analysts said in recent commentaries broadcast by RFA Mandarin.

Xi's administration has presided over an unprecedented decoupling from the rest of the world,abandoning the country's roleas global manufacturing and export hub in favor ofstimulating domestic demand, and calling for an end to dependence on cutting-edge technology from the United States, they said.

On June 24, Xi said that "building a strong country through science and technology by 2035" was a strategic goal of his administration, yet the government can't afford the price tag for such a program, according to economist Cheng Xiaonong.

Instead, the government is talking about "a new form of productivity," which appears to be code for doing more with less, Cheng said in a recent interview with RFA Mandarin.

Tax reforms

For economist and author He Qinglian, tax reforms will likely be a major topic at the behind-closed-doors meeting, which runs through July 18 at Beijing's Jingxi Hotel.

Xi and his officials will be looking at ways to boost taxation and also possibly give cash-strapped local governments more power to raise local taxes, to offset the huge hole in their budgets caused by the loss of property-related income amid the collapse of the real estate market.

"The most important issue is how to increase tax revenue," He wrote in a July 11 commentary for RFA Mandarin. "That means sources of taxation -- who pays tax, and how much."

"The real estate market has been sluggish, local financial resources have been exhausted, and [local governments] owe huge debts," He wrote. "The central government has to lend a hand."

She said the main reason the third plenum wasdelayed by several monthswas so that officials could hash out a new taxation regime that increases local governments' share of taxation revenues.

"This matter is of great importance, and a lot of field investigations and consultations had to be done before the plan could be proposed," He said.

According to official media reports, tax reforms will likely focus on reforms to income tax, property taxes and consumption taxes, with the latter the most likely target, probably to be levied by local governments, she wrote, citing official media reports that they will likely target high-end consumer goods and services enjoyed by the most wealthy.

Lying flat

While poor people arestruggling to afford ramen noodlesand a bottle of soda, and the squeezed middle classfaces unemploymentand possible repossession, luxury consumption rose by 11% in China to 607.7 billion yuan in 2023 year-on-year, accounting for around 38% of the global market, He said.

"The new round of fiscal and tax reforms will ... take some grains of rice from the central government's bowl and collect new taxes to assuage the fiscal hunger of local governments," she wrote.

Meanwhile, the rousing rhetoric about new directions, reform and "opening up" that seeks to frame Xi as a reformer on a par with his late predecessor Deng Xiaoping comes amid a background ofdeep anxiety about the future, Cheng Xiaonong said, this time in a July 11 commentary for RFA Mandarin.

"The most active young Chinese on the internet are well-educated, yet now the vast majority of them are full of anxiety about their future and the future of China," Cheng said." More than half of them feel that their future is over and there is no point in studying hard, so they lie flat."

Cheng cited a recent survey ranking the most common forms of misery in China, the worst being unemployment coupled with kids, a mortgage, debts, repossession and ailing elderly parents, saying that it's the overstretched middle class who are most worried about the economy.

"The families listed in these nine categories are actually middle-class," Cheng said, adding that many already tick at least a few of the boxes on the litany of woes, citing workplace discrimination against anyone over 35.

While state media have been promising a new wave of "reform," drawing parallels with the economic reforms launched by Deng Xiaoping in the late 1970s after the death of Mao Zedong and trial of the Gang of Four, Cheng concluded that a real change in direction is highly unlikely under Xi, who has concentrated political power in his own hands, doesn't share power with anyone, and therefore can't be forced to take their views into account.

Current affairs commentator Yu Ting said it's not just young people who are "lying flat" in the face of challenges.

"Everyone, from officials to ordinary people are basically lying flat right now," Yu told RFA in an interview on Monday, citing a lackluster response from local governments to heavy rainstorms and flooding across China this summer, "coupled with economic recession, the withdrawal of foreign capital, and local fiscal depletion."

Yet official media had been "ceaselessly singing their praises and cracking down on public opinion with unprecedented strength," Yu said.

Reform era is over

Senior current affairs commentator Cai Shenkun said the Deng Xiaoping era of economic reform is over.

"Reform and opening up is actually finished, and the subtext of what they call deepening reform is about upholding the absolute authority of the Chinese Communist Party," Cai said. "That's the key highlight of the third plenum."

He said the emphasis on security is in part a political backlash after four decades of market economics saw much of the party's power pass to the private sector and market forces.

"There may be some redistribution of local and central finances, but it's clear that local officials are basically doing nothing because they have no money and can't even make ends meet," Cai said.

U.S.-based democracy activist and former 1989 student leader Wang Dan agreed, saying Xi will be forging ahead in the same direction, rather than taking any new ones.

The official communique announcing the meeting gave no indication that any fundamental reforms will emerge, Wang wrote in a July 11 commentary for RFA Mandarin, citing the document's insistence on "the overall leadership of the party."

"The so-called reforms at this third plenum are about strengthening the leadership of the party," Wang wrote. "The reform that China needs most today is to get rid of this situation where everything must be led by the party. If that doesn't change, then there can be no true reform."

Reform, in short, doesn't always mean progress, and can sometimes mean a regressive step, Wang warned.

"Under the rule of Xi Jinping, this talk of deepening reform is probably an ominous sign," he said, citing online comments that the likely outcome will betougher social controlsto prevent unrest.

Prominent dissidents have been placed under house arrest or forced to leave town during the plenary session, with a strong police presence on the streets of Beijing on Monday, residents reported.

Drones have been banned from the capital's airspace, political journalist Gao Yu has been taken out of town, while anyone with a grievance or complaint against the government is under surveillance, a dissident who declined to be named for fear of reprisals told RFA Mandarin on Monday.

A petitioner who gave only the surname Zhou for fear of reprisals said some petitioners have switched off their phones to stop police from tracking them, in a bid to remain in the capital rather than being forced to travel back to their hometowns under escort.

"They switch off their phones and then use a signal-blocking bag they bought online and put their phones in the bag, so it's harder for the authorities to track," she said.