Breakdown of the Third Plenum Decision & Xi's Explanation
Hi folks,
Clearly, there is no rest for the weary. The Third Plenum Decision document and Xi Jinping’s explanation were published on Sunday evening. These two documents dominate the entire paper today. Xinhua has also published the official English versions for both documents.
I am doing a breakdown of these below. I’ll begin with Xi Jinping’s explanation to the plenary session. This helps identify the key points that he wanted highlighted. After this, I’ll cover excerpts from the document that stood out to me.
I. Xi’s Explanation (English Version)
The first section of Xi’s explanation discusses the considerations regarding reform.
Xi is quite clear the purpose of reform is “to translate these strategic plans (formulated at the 20th Party Congress) into action and turn the vision of Chinese modernization into reality.” What is also needed is to “improve the systems and mechanisms across all sectors, so as to provide institutional support for advancing Chinese modernization.”
“In the face of new developments and tasks, we must further deepen reform comprehensively to continue refining institutions and mechanisms in various sectors, so as to help consolidate foundations, leverage strengths, and shore up areas of weakness. This will enable us to better translate our country’s institutional strengths into effective governance.”
The next bit is important:
“At present, unbalanced and inadequate development remains a pronounced problem in promoting China’s high-quality development. For example,
the market system still needs improvement;
the market itself is not adequately developed;
the relationship between the government and the market needs to be further straightened out;
our innovation capacity falls short of the requirements for high-quality development;
the industrial system, while large in size and extensive in scope, is not yet strong or sophisticated enough;
the over-reliance on key and core technologies controlled by others has not been fundamentally changed;
the foundations of agriculture need to be further strengthened;
wide gaps persist in development and income distribution between urban and rural areas and between regions; and
weak links remain in improving the people’s wellbeing and protecting the ecological environment. In essence, all of these challenges reflect the evolution of the principal contradiction in Chinese society and are the result of ongoing development. It is essential that they are addressed by further deepening reform comprehensively on an institutional basis.”
Also this: “In particular, momentous changes of a magnitude not seen in a century are accelerating across the world, regional conflicts and disturbances keep cropping up, global issues are becoming more acute, and external attempts to suppress and contain China are escalating. China has entered a period in which strategic opportunities, risks, and challenges coexist and uncertainties and unpredictability are rising. Various ‘black swan’ and ‘gray rhino’ events have the potential to occur at any time. To effectively deal with these risks and challenges and seize the strategic initiative amid intensifying international competition, we need to further deepen reform comprehensively, so that we can create sound institutions to prevent and defuse risks and respond to challenges, strive to foster new opportunities amid crises, and break new ground amid the changing landscape.”
The second section contains details on the drafting process:
In November 2023, it was decided to establish a drafting team for the plenum decision.
Xi headed the group. Wang Huning, Cai Qi, and Ding Xuexiang served as its deputy chiefs.
On November 27, 2023, the Central Committee issued a notice about soliciting opinions on the agenda of the third plenary session from all localities, departments, and sectors, as well as some officials and individuals.
The group’s first meeting was on December 8, 2023.
Xi says that “we have prioritized institutional reform, reforms of strategic and overarching importance, and the leading role of economic structural reform, thus underscoring the guidance of reform measures.”
“On May 7, 2024, the text of the resolution was issued to select Party members, including retired senior Party officials, for consultation. Opinions were also sought from the central committees of other political parties, from leaders of the All-China Federation of Industry and Commerce, from prominent figures without party affiliation, and from relevant enterprises, scholars, and experts. The feedback shows that all those consulted believe that the strategic measures for further deepening reform comprehensively presented in the draft resolution closely focus on the theme of advancing Chinese modernization. The draft follows the right political orientation and sets forth reform plans for resolving the major institutional problems hindering Chinese modernization. With a distinct theme, clear priorities, and feasible measures, the document will, in their opinion, serve as an overall plan and call to action for comprehensively advancing broader and deeper reform on the new journey in the new era. They also agree that the draft evinces a historical initiative with regard to upholding and improving the system of socialism with Chinese characteristics and modernizing China’s system and capacity for governance, and it will provide strong impetus and institutional support for Chinese modernization. Based on a careful study of the 1,911 opinions and suggestions received from all sides, the drafting group incorporated as many of these as possible into the draft, resulting in 221 revisions to the text.”
In the third section Xi discusses the document.
a. On economic structural reform:
“Focusing on the pivotal issue of balancing the relationship between the government and the market, the draft resolution gives prominence to building a high-standard socialist market economy and makes arrangements for economic structural reform in major areas and key links. It mentions that we will strengthen strategic coordination between relevant administrative departments and work to refine the layout of the state-owned sector and adjust its structure, so as to see state capital and state-owned enterprises get stronger, do better, and grow bigger, with their core functions and core competitiveness enhanced. Targeting the development of the non-public sector, it puts forth the requirements of formulating a private sector promotion law, strengthening law enforcement and justice administration to protect property rights, and preventing and rectifying administrative and criminal interference in economic disputes. It also includes measures such as enhancing the binding force of fair competition review, reviewing and abolishing regulations and practices impeding the development of a unified national market and fair competition, and improving institutions and rules for production factor markets. All these steps will help unleash the internal driving forces and creativity of our society as a whole.”
“To develop productive forces characterized by high technology, high efficiency, and high quality, it mentions that we will work to increase institutional supply in new areas and arenas, establish a mechanism for ensuring funding increases for future-oriented industries, elevate national standards to guide the upgrading of traditional industries, and channel various types of advanced production factors toward the development of new quality productive forces.”
“With a view to deepening reform of the fiscal and tax systems in a coordinated manner, the draft resolution includes arrangements to expand the sources of tax revenue at the local level and place more fiscal resources at the disposal of local governments. It proposes measures to appropriately expand the scope of use for funds raised from the sale of local government special-purpose bonds while properly granting the central government greater administrative authority and increasing the share of its expenditure in total government expenditure. Efforts will be made to refine the role and governance of financial institutions, improve the functions of the capital market with balanced investment and financing, and improve the financial regulatory system.'“
b. On developing support institutions and mechanisms for all-around innovation:
In terms of reform in the education system, the document “includes arrangements such as advancing reforms of higher education institutions on a categorized basis and developing discipline adjustment mechanisms and talent training models to meet the needs of China’s scientific and technological development and national strategies. This will see us making extraordinary moves to plan for disciplines and majors that are in urgent demand. The document also specifies the requirements of refining the mechanisms for facilitating scientific and technological innovation in universities and ensuring more efficient application of advances.”
The draft resolution “mentions that we will better define the roles and layout of our national research institutions, advanced-level research universities, and leading high-tech enterprises and improve the management of science and technology plans to ensure that they are forward-looking and play a guiding role in basic research, interdisciplinary frontier areas, and key fields. Moreover, the principal role of enterprises in innovation will be reinforced, and mechanisms for fostering leading high-tech enterprises will be established; public institutions engaged in scientific research will be allowed to implement a more flexible management system as compared to general public institutions, so that they can explore approaches to instituting corporate management; and reforms to grant researchers corresponding rights over their outputs will be deepened.”
c. On advancing reform in a comprehensive manner:
To refine the system for whole-process people’s democracy, the document “details arrangements such as strengthening the institutions through which the people run the country, improving the mechanisms for consultative democracy, enhancing democracy at the primary level, and building a broad united front.”
For improving the system of socialist rule of law with Chinese characteristics, the document “mentions arrangements such as strengthening legislation in key, emerging, and foreign-related areas; refining the institutions and mechanisms for ensuring that supervisory organs, public security organs, procuratorates, courts, and administrative departments for justice all fulfill their respective functions and that powers of supervision, investigation, procuratorate, adjudication, and enforcement complement and constrain each other; and improving the mechanisms for building a law-based society.”
In regard to cultural sector reforms, among other things, Xi mentions “improving the system for comprehensive cyberspace governance; and moving ahead with restructuring China’s international communication framework and establishing a more effective international communication system.”
On ensuring and improving the people’s wellbeing, the document includes “arrangements such as improving the income distribution system and keeping income distribution well-regulated; improving the policy environment to boost employment by encouraging business startups, and supporting and regulating the development of new forms of employment; building a sound social security system to serve people in flexible employment, rural migrant workers, and those in new forms of employment, and lifting all restrictions preventing people from accessing social security in the places where they work but do not hold permanent residency; and fostering a new development model for the real estate sector and giving municipal governments more decision-making powers to regulate the real estate market. Moreover, it calls for efforts to further reform the medical and healthcare systems and implement a health-first strategy; improve the systems for supporting population development and providing related services, refine the policy system and incentive mechanisms for boosting the birth rate, and refine the policies and mechanisms for developing elderly care programs and industries; and advance reform to gradually raise the statutory retirement age in a prudent and orderly manner in line with the principle of promoting voluntary participation while allowing appropriate flexibility.”
On reforming the system of ecological conservation, Xi says that the document “lays out plans for improving the basic systems for ecological conservation, improving environmental governance systems, and improving mechanisms for green and low-carbon development. It also specifies the requirements of implementing region-specific environmental management systems featuring differentiated and targeted regulation, improving the trans-regional compensation mechanism for ecological conservation, implementing fiscal, tax, financial, investment, and pricing policies as well as standards to support green and low-carbon development, and accelerating the planning and development of a new energy system.”
d. On balancing development and security imperatives:
“National security provides a pivotal foundation for ensuring steady and sustained progress in Chinese modernization. Giving higher priority to national security, the draft resolution puts forth a set of requirements with a focus on modernizing China’s system and capacity for national security. These requirements include:
creating a coordinated and highly effective system for protecting national security and better leveraging science and technology to safeguard national security;
improving the response and support system for major public emergencies;
instituting oversight systems to ensure the safety of artificial intelligence;
exploring avenues for establishing a unified national population management system; and
improving the integrated systems for maintaining law and order and cracking down hard on illegal and criminal activities that cause grave public concern.
Furthermore, the draft also proposes measures such as:
establishing sound coordination mechanisms for promoting security in neighboring regions
strengthening mechanisms for countering foreign sanctions, interference, and long-arm jurisdiction; and
improving mechanisms for preventing and controlling trade risks, improving the system of foreign-related laws and regulations and the systems for enforcing the rule of law, and deepening law enforcement and judicial cooperation with other countries.
To continue deepening reform of national defense and the armed forces, the document puts forward requirements such as improving the institutions and mechanisms for leading and managing the people’s armed forces, deepening reform of joint operations systems, and deepening military-civilian reforms.”
e. On strengthening Party leadership over reforms:
“The draft resolution mentions that we will refine the mechanisms through which major decisions and plans of the Central Committee are implemented; further reform the management system for officials and personnel and firmly follow the right approach to selecting and appointing officials, seeing that officials who are politically committed, highly responsible, determined to pursue reform, outstanding in performance, and honest and clean must be selected and the problem of officials acting arbitrarily or lacking the willingness, courage, or ability to deliver must be addressed; make sure that officials have a correct understanding of what it means to perform well, and the ‘three distinctions’ are applied to encourage officials to forge ahead in a pioneering spirit and demonstrate enterprise in their work; strengthen the political and organizational functions of Party organizations; and refine the systems and mechanisms for preventing and tackling pointless formalities and bureaucratism, improve the mechanisms for investigating and addressing instances of both misconduct and corruption, and adopt more measures to effectively prevent and control new and disguised forms of corruption.”
II. Excerpts from the Decision Document (English Version)
A resounding approval of Xi’s policies:
“The Party Central Committee with Comrade Xi Jinping at its core has, with great historical initiative, tremendous political courage, and a strong sense of mission, united and led the entire Party, the military, and Chinese people of all ethnic groups in unshackling their thinking and breaking down the barriers erected by vested interests. We have dared to brave uncharted waters, grapple with tough problems, and navigate potential dangers and have worked resolutely to remove institutional obstacles in all areas. As a result, reform has evolved from a variety of trials and breakthroughs limited to certain areas into an integrated drive being advanced across the board. Foundational institutional frameworks have been basically put in place in all sectors, and historic, systemic, and holistic transformations have been achieved in many fields. Overall, we have accomplished the reform tasks set at the third plenary session of the 18th Central Committee and attained our objective of achieving marked results in making all institutions more mature and better-defined by the time of the Party’s centennial in 2021.”
Why is reform needed?
“The present and the near future constitute a critical period for our endeavor to build a great country and move toward national rejuvenation on all fronts through Chinese modernization. As Chinese modernization has been advanced continuously through reform and opening up, it will surely embrace broader horizons through further reform and opening up. To deal with complex developments both at home and abroad, adapt to the new round of scientific and technological revolution and industrial transformation, and live up to the new expectations of our people, it is vital that we continue to advance reform. Advancing reform is essential for upholding and improving the system of socialism with Chinese characteristics and modernizing China’s system and capacity for governance, for putting the new development philosophy into practice and better adapting to the evolution in the principal contradiction in Chinese society, and for adhering to a people-centered approach to see that the gains of modernization benefit all our people fairly. It is also crucial for responding to major risks and challenges and ensuring steady and sustained progress in the cause of the Party and the country, for promoting the development of a human community with a shared future and winning the strategic initiative amid accelerating global changes of a like not seen in a century, and for further advancing the great new project of Party building in the new era and making our Marxist party stronger.:”
What is the broad goal of reform?
“By 2035, we will have finished building a high-standard socialist market economy in all respects, further improved the system of socialism with Chinese characteristics, generally modernized our system and capacity for governance, and basically realized socialist modernization.”
Within this context, there are 7 sub-goals. I am highlighting the first one because there has been some talk around the Party dropping language around the “decisive role of the market”. But that framing has been retained while also emphasising the role of the government.
“Building a high-standard socialist market economy. We will see that the market plays the decisive role in resource allocation and that the government better fulfills its role. We will uphold and improve China’s basic socialist economic systems, achieve greater self-reliance and strength in science and technology, and promote high-standard opening up. We will build a modernized economy, move faster to create a new pattern of development, and promote high-quality development.”
The next section on Guiding Principles identifies strengthening institutional building as the “main task.” It adds: “We must consolidate foundational systems, refine basic systems, and innovate important systems.”
What does it mean to build a high-standard socialist market economy?
After this the document discusses building high-standard socialist market economy. It first talks about the two unwaverings, a slogan that indicates support for the private sector. But there’s really nothing in there that frees the private sector to pursue profits. Everything is essentially driven by strategic goals, with the state being the key actor directing capital. The Party’s commitment to supporting the private sector is likely to come in the form of a private sector promotion law and there are comments about financing support policies for the private sector. But prima facie, none of this inspires confidence in terms of enhanced freedom for the private sector.
Key excerpts:
It talks about efforts to “help state capital and SOEs get stronger, do better, and grow bigger, with their core functions and core competitiveness enhanced. We will clearly define the functions of different types of SOEs, improve the management of their primary responsibilities and core business, and identify the key areas and orientations for state capital investment. State capital will be steered toward major industries and key fields that are vital to national security and serve as the lifeblood of the national economy, toward sectors such as public services, emergency response, and public welfare, which concern our country’s prosperity and our people’s wellbeing, and toward forward-looking and strategic emerging industries…We will establish a system to assess SOEs’ performance in fulfilling their strategic missions, refine the category-based SOE evaluation system, and introduce value-added accounting in the state-owned sector. While promoting independent operation of natural monopoly businesses in sectors such as energy, railway, telecommunications, water conservancy, and public utilities, we will advance market-oriented reforms in the competitive areas of these sectors and improve regulatory institutions and mechanisms.”
This is the paragraph regarding the private sector. It doesn’t inspire a whole lot of confidence. “We will formulate a private sector promotion law. We will do more to remove barriers to market access, work to see that the competitive areas of infrastructure are open to market entities in a fair manner, and improve the long-term mechanism by which private enterprises participate in major national projects. We will support capable private enterprises in leading national initiatives to make breakthroughs in major technologies and provide private enterprises with greater access to major national scientific research infrastructure. We will refine financing support policies and systems for private enterprises to resolve the difficulties they face in accessing affordable financing. We will improve the legal framework for the long-term regulation of charges levied on enterprises and for clearing overdue payments owed to them. We will move faster to set up a system for comprehensively evaluating private enterprises’ credit status and refine the credit enhancement system for small and medium private enterprises. We will support and guide private enterprises in improving their governance structures and management systems, building up compliance capacity, and better preventing corruption-related risks. We will strengthen ongoing and ex post oversight and regulate administrative inspections on private enterprises.”
Next the section discusses building a unified national market. It says:
“We will enhance the binding force of fair competition review, take stronger action against monopolies and unfair competition, and review and abolish regulations and practices that impede the development of a unified national market and fair competition. We will bring local regulations and institutions for attracting investment under regulation and strictly prohibit policy incentives in breach of laws and regulations. We will establish sound, unified, and well-regulated public resource trading platforms that facilitate information sharing. Such platforms will cover public bidding as well as procurement by the government, public institutions, and SOEs and ensure full transparency throughout the project management process…We will develop a unified market for urban and rural land designated for construction. We will refine the underlying systems for promoting well-regulated development of the capital market and foster an integrated national market for technology and data. By refining the mechanisms whereby production factors are priced primarily based on market supply and demand, we will prevent improper government interference in pricing. We will also develop better mechanisms to ensure the contributions of production factors, such as labor, capital, land, knowledge, technology, management, and data, are determined by the market and rewarded accordingly. Pricing reforms will be continued in sectors such as water, energy, and transportation, and the tiered pricing mechanisms for household water, electricity, and natural gas consumption will be improved, as will the pricing mechanism for refined petroleum products.”
This also covers the domestic demand system, and it doesn’t seem like there is any shift in the supply-side approach in this regard. For example, the document says “We will step up efforts to develop a complete domestic demand system. To this end, we will set up long-term government investment mechanisms to support the development of major projects that are of fundamental and far-reaching importance and serve the public interest; refine the institutions and mechanisms that enable government investment to effectively drive nongovernmental investment; further reform the investment review and approval system; improve the mechanisms for stimulating and facilitating nongovernmental investment; and create a market-driven mechanism for ensuring self-sustaining growth of effective investment. We will refine long-term mechanisms for expanding consumption, reduce relevant restrictions, boost public spending as necessary, and actively promote the debut economy.”
The final bit in this section is around improvement of the property rights system, law-enforcement, market access system, market exit system, the social credit system, and enterprise bankruptcy mechanism. It also talks about exploring “the establishment of a bankruptcy system for individual persons.”
How to advance high-quality economic development?
This section strongly focuses on the development of manufacturing and “new quality productive forces”, i.e., those that are characterized by high technology, high performance, and high quality. It says:
“A stronger push will be made to pursue innovation in key generic technologies, cutting-edge technologies, modern engineering technologies, and disruptive technologies, and institutional supply will be boosted in new areas and arenas. We will establish a mechanism for ensuring funding increases for industries of the future, improve the policy and governance systems for promoting the development of strategic industries such as next-generation information technology, artificial intelligence, aviation and aerospace, new energy, new materials, high-end equipment, biomedicine, and quantum technology, and steer emerging industries toward sound and orderly development. National standards will be elevated to guide the upgrading of traditional industries, and enterprises will also be encouraged to apply digital, intelligent, and green technologies to transform and upgrade these sectors. We will impose tighter institutional constraints for environmental protection and safety.”
“We will encourage and regulate the development of angel investment, venture capital, and private equity investment, better leverage the role of government investment funds, and work to promote the development of patient capital”.
“We will move faster to advance new industrialization, promote the growth and expansion of advanced manufacturing clusters, and make the manufacturing sector higher-end, smarter, and more eco-friendly…We will establish better operation and oversight mechanisms for major industrial investment funds to ensure that capital is channeled toward our country’s strategic needs. We will put in place a funding mechanism to see that the share of manufacturing in the national economy remains at a desirable level. We will also realize a reasonable reduction in overall costs and tax and fee burdens in the manufacturing sector.”
“We will build and put into operation national data infrastructure to promote data sharing. We will work faster to set up a system for data property rights concerning ownership determination, market transaction, proceeds distribution, and interests protection. We will boost our governance and regulatory capabilities in relation to data security and put in place a mechanism to ensure efficient, convenient, and safe cross-border data flows.”
“We will move faster to build industrial and supply chains that are self-supporting and risk-controllable, improve the institutions and mechanisms for bolstering key industrial chains such as integrated circuits, industrial machine tools, medical equipment, instruments, basic software, industrial software, and advanced materials, and strive to secure more technological breakthroughs that can be applied across entire industrial and supply chains. A mechanism will be put in place to assess and respond to industrial and supply chain risks.”
It also talks about developing the service sector, modernising infrastructure and improving the national reserves system.
What are the policies for supporting all-round innovation?
This covers education and science and technology innovation structure reforms, along with talent development. Key points:
“We will improve the mechanisms for fostering virtue through education, introduce integrated reforms and new approaches in the political education curriculum at all levels, from elementary school to university, and refine the systems for nurturing capable young people with sound moral grounding, intellectual ability, physical vigor, aesthetic sensibility, and work skills.”
“We will advance reforms of higher education institutions on a categorized basis and develop discipline adjustment mechanisms and talent training models to meet the needs of China’s scientific and technological development and national strategies. This will see us making extraordinary moves to plan for disciplines and majors that are in urgent demand.”
“We will promote high-standard opening up in the education sector, and encourage first-rate foreign universities of science and engineering to develop partner schools and programs in China.”
The document talks about mounting a “concerted push for breakthroughs in core technologies in key fields.” It calls to “establish risk monitoring, early warning, and response systems to safeguard science and technology security, and ensure self-sufficiency in scientific and technological infrastructure.” It also calls to “expand international science and technology exchanges and cooperation, encourage the establishment of international science and technology organizations in China, and improve the management mechanisms whereby China’s universities, research institutes, and science and technology-related social groups engage in specialized exchanges and cooperation with their foreign counterparts.”
“We will see that basic research is conducted in a better organized way, raise the share of total science and technology expenditure that goes toward basic research, and improve the basic research investment mechanisms to ensure support on both a competitive and ongoing basis. Regions, enterprises, social organizations, and individuals with the resources to support basic research will be encouraged to do so. We will also support researchers in diversifying their subjects for study and encourage high-risk, high-reward basic research.”
“We will set up a reserve fund system for corporate R&D and back enterprises that volunteer to lead or participate in major national science and technology programs. Mechanisms will be rolled out to promote the development of small and medium enterprises (SMEs) that use specialized and sophisticated technologies to produce novel and unique products. To encourage sci-tech SMEs to boost their R&D spending, we will raise the rate of additional tax deductions for their R&D expenses. We will encourage and guide higher education institutions and research institutes in authorizing the use of their proprietary scientific and technological advances by micro, small, and medium enterprises on a ‘use first, pay later’ basis.”
“We will refine the mechanisms for allocation, management, and utilization of central government research funds and improve the institutions for the implementation of central government-funded science and technology programs and their management by specialized agencies. We will expand application of the contract system for government-funded research projects and grant scientists a greater say in deciding on technology roadmaps, spending funds, and allocating resources.”
“We will enhance the national technology transfer system, move faster to plan and build a number of proof-of-concept and pilot-scale testing platforms, refine the policies for the initial application of newly-developed equipment, materials, and software, and increase government procurement of independently innovated products.”
“We will refine policies for supporting the investment of long-term capital in projects at the early stages, in small enterprises, over long time horizons, and in advanced and core technologies…We will facilitate foreign equity investment and venture capital investment in China.”
The next bit is on improving macroeconomic governance
This covers improving policy coordination, fiscal and tax reforms, financial system reform and regional coordinated development. A lot of this discusses local government financing. There are clearly some indications of greater funding support for local governments. But there is nothing specific on how the Party intends to deal with the debt risks. A key commitment in this section is about the formulation of a financial law. In addition, the points on the development of “a homegrown, controllable cross-border payment system” and promise of “unified monitoring and oversight of all foreign debt” are important to note.
Key excerpts:
To promote the implementation of national development plans and major strategies, we will foster greater synergy between our fiscal, monetary, industrial, pricing, and employment policies, improving the allocation of newly acquired resources and adjusting the mix of existing resources. We will explore the introduction of national macro balance sheet management. Both economic and non-economic policies will be evaluated to ensure that they are consistent with the macro policy orientation.”
“The tax structure will be improved to make taxation systems more conducive to high-quality development, social fairness, and the building of a unified market.”
“To place more fiscal resources at the disposal of local governments, we will expand the sources of tax revenue at the local level and grant greater authority for tax management to local governments as appropriate. To improve the system of transfer payments, we will overhaul special transfer payments and increase the scale of general transfer payments. These will help ensure that the fiscal resources of prefecture- and county-level governments are commensurate with their powers. We will establish incentive and constraint mechanisms through transfer payments to promote high-quality development. We will take steps to move excise tax collection further down the production-to-consumption chain, with the power of collection steadily being passed to local governments. We will improve the value-added tax credit refund policy and free up the channels for making tax deductions. The ratio for taxes shared between the central and local governments will be optimized. We will look into rolling the urban maintenance and construction tax, education surcharges, and local education surcharges into one single local surtax. Local governments will have the authority to set the rate for this tax within a predetermined range. We will appropriately expand the scope of use for funds raised from the sale of local government special-purpose bonds, permitting a greater share of such funds to be used as capital in more sectors and on a larger scale. The systems for managing government debt will be improved. We will establish a system for monitoring and regulating all local government debt as well as long-term mechanisms for preventing and defusing hidden debt risks. We will move faster to reform and transform local government financing platforms. In regulating the management of non-tax revenue, we will delegate, as appropriate, some management authority to local governments and allow them to tailor their practices to local conditions.”
“We will actively develop technology finance, green finance, inclusive finance, pension finance, and digital finance and work to ensure quality financial services for major strategies, key fields, and weak links. We will refine the role and governance of financial institutions and the incentive and constraint mechanisms for ensuring that they serve the real economy. We will diversify equity financing, step up the development of multilevel bond markets, and increase the proportion of direct financing. We will optimize the state-owned financial capital management system.”
“We will facilitate the entry of long-term capital into the market. We will improve the overall quality of listed companies, strengthen relevant regulation and delisting systems, and establish long-term mechanisms to enhance the underlying stability of the capital market. We will improve the mechanisms for regulating and constraining the behaviors of major shareholders and actual controllers. We will optimize dividend incentive and constraint mechanisms for listed companies and improve the mechanisms for protecting investors. We will encourage regional equity markets to align their rules and implement unified standards.”
“A financial law will be formulated. We will improve the financial regulatory system to ensure that all financial activities are placed under regulation in accordance with the law, strengthen regulatory responsibility and accountability systems, and improve regulatory coordination between the central and local levels. We will build secure and efficient financial infrastructure, unify the rules and systems for registration, custody, settlement, and liquidation for the financial market, establish binding constraints for defusing risks at an early stage, and build a robust system to effectively fend off and control systemic risks and ensure financial stability. We will improve the mechanisms for protecting financial consumers and cracking down on illegal financial activities and establish a firewall for industrial and financial capital. We will promote high-standard opening up of the financial sector, steadily and prudently advance the internationalization of the RMB, and develop offshore RMB markets. We will make steady progress in the R&D and application of digital RMB and move faster to build Shanghai into an international financial center.”
“We will push forward the development of a homegrown, controllable cross-border payment system and strengthen financial security mechanisms as we open our doors wider to the outside world. We will establish a system for the unified monitoring and oversight of all foreign debt.”
What is covered in promoting integrated urban-rural development?
This covers the hukou system reform, urban governance and development, rural revitalisation, rural and urban land management systems, supporting farmers, low-income rural households, etc.
Two key points:
We will implement the systems for allowing people to obtain household registration and access basic public services in their place of permanent residence. We will push to see that eligible people who have moved to cities from rural areas enjoy the same rights as registered local residents with regard to social insurance, housing support, and access to compulsory education for their children living with them. The process of granting permanent urban residency to these people will also be accelerated. We will protect the lawful land rights and interests of former rural residents who now hold permanent urban residency, protect, in accordance with the law, their rights to contract rural land, to use their rural residential land, and to share in the proceeds from rural collective undertakings, and explore avenues to facilitate voluntary, paid transfers of these rights.”
“We will coordinate efforts to establish an inter-provincial mechanism for major grain-purchasing areas to compensate major grain-producing areas so as to make substantive headway in incentivizing the latter.”
What does high-standard opening up entail?
“We will promote alignment with high-standard international economic and trade rules and harmonize rules, regulations, management, and standards relating to property rights protection, industrial subsidies, environmental standards, labor protection, government procurement, e-commerce, the financial sector, and other areas, in an effort to create an institutional environment that is transparent, stable, and predictable.
“We will seize the initiative by opening China’s commodity, services, capital, and labor markets wider to the outside world in an orderly manner and unilaterally opening our doors wider to the world’s least developed countries. We will further reform institutions and mechanisms for foreign aid to realize full-chain management…We will expand our globally-oriented network of high-standard free trade areas, establish compliance mechanisms that are aligned with prevailing international rules, and optimize the environment for opening up and cooperation.”
In regard to foreign trade structural reform, this bit is useful to note: “The mechanisms for preventing and controlling trade risks will be improved, and our export control framework and trade remedy system will be refined.”
On FDI and ODI: “We will expand the catalog of encouraged industries for foreign investment, appropriately shorten the negative list for foreign investment, remove all market access restrictions in the manufacturing sector, and promote wider opening with regard to telecommunications, the internet, education, culture, medical services, and other sectors in a well-conceived way. We will further reform the institutions and mechanisms for promoting foreign investment, ensure national treatment for foreign-funded enterprises in terms of access to factors of production, license application, standards setting, and government procurement, and support them in collaborating with upstream and downstream enterprises in industrial chains. We will improve relevant measures to make it more convenient for people from outside the mainland to live, receive medical services, and make payments on the mainland. We will refine the institutions and mechanisms for promoting and protecting Chinese investment abroad, improve the management and service systems for outward investment, and facilitate international cooperation in industrial and supply chains.”
“We will continue to implement the Belt and Road Science, Technology, and Innovation Cooperation Action Plan and redouble efforts to develop multilateral platforms for cooperation in green development, the digital economy, artificial intelligence, energy, taxation, finance, disaster mitigation, and other areas. We will work to improve the integrated framework for land, sea, air, and cyberspace connectivity and build a multidimensional network to connect countries along the Belt and Road”.
The next section is on promoting whole-process people’s democracy.
One key point in this is:
“We will see that people from outside the Party can better play their roles and improve the systems for building up the ranks of non-CPC representatives. A law on promoting ethnic solidarity and progress will be formulated, and we will take steps to improve the institutions and mechanisms for forging a strong sense of community for the Chinese nation so as to further strengthen our national cohesion. We will make systematic efforts to ensure that religions in China are Chinese in orientation and establish a more solid legal footing for the governance of religious affairs. We will improve the mechanisms for providing political guidance to non-CPC intellectuals and people from emerging social groups.”
What does it mean to promote socialist rule of law with Chinese characteristics?
“We will improve the legislative framework under which Party committees exercise leadership, people’s congresses play a principal role, government departments provide support, and various sectors of society get involved. We will make sure that steps to enact, revise, abolish, interpret, and codify laws are well-coordinated and work to bolster legislation in key, emerging, and foreign-related areas…A unified national information platform for laws, regulations, and other normative documents will be created.”
The document talks about establishing a law-based government administration, improving mechanisms for “impartial law enforcement and administration of justice” and building a law-based society.
“Adhering to the correct outlook on human rights, we will provide more effective human rights protection through law enforcement and administration of justice. We will improve the working mechanisms for ex ante review, ongoing oversight, and ex post redress and refine the system for coercive measures that concern the personal rights of citizens as well as the sealing, sequestering, and freezing of assets. We will investigate and prosecute, in accordance with the law, the abuse of power to bend the law for personal gain, illegal detention, the use of torture to extort confessions, and other similar offences. We will see that lawyer defense is provided in all criminal cases and introduce a system to seal records for minor offences.”
On rule of law in foreign-related affairs: “We will establish mechanisms for taking a holistic approach to promoting legislation, law enforcement, administration of justice, observance of the law, legal services, and the training of legal professionals for foreign-related affairs. We will improve the system of foreign-related laws and regulations and the systems for enforcing the rule of law and work to deepen international cooperation in law enforcement and administration of justice. We will refine the judicial system that allows the parties in foreign-related civil lawsuits to lawfully enter into jurisdictional agreements and choose applicable extraterritorial laws. We will improve the arbitration and mediation system for international commercial disputes and cultivate world-class arbitration organizations and law firms. We will actively participate in the formulation of international rules.”
What does cultural sector reform cover?
“We will improve the system under which the theoretical study groups of Party committees (leading Party members groups) hold regular study sessions, as well as the system for theoretical and political work. We will develop new approaches in the project to study and develop Marxist theory and promote innovation in philosophy and social sciences with a view to building a Chinese intellectual system in this field. We will improve the spokesperson system, develop content production and communication mechanisms as well as assessment systems for all forms of media, and promote a systemic transformation in mainstream media. We will improve the mechanisms for guiding public opinion and coordinating responses to public opinion incidents. Activities to foster ideals and convictions will be carried out on a regular and institutionalized basis. We will enhance the systems and mechanisms for cultivating and practicing the core socialist values.”
“We will establish a system for carrying forward traditional Chinese virtues and improve the institutions and mechanisms for cultivating social morality, work ethics, family values, and personal integrity. We will refine the long-term mechanisms for promoting integrity and credibility and provide public education and guidance so that all members of society readily abide by the law and respect public order and moral standards. We will take firm steps to oppose money worship, hedonism, egocentricity, and historical nihilism.”
“We will improve the mechanisms for developing and managing generative artificial intelligence. We will step up the law-based governance of cyberspace, improve the long-term governance mechanisms for the online environment, and refine the system for protecting minors in cyberspace.” (Comment: It is very odd that this was included in the context of the cultural sector rather than from an economic productivity perspective. It reflects an ideological risk-based lens being applied rather than an economic opportunity lens.)
“We will move faster to develop China’s discourse and narrative systems with a view to making our international communication more effective. Mechanisms for promoting the implementation of the Global Civilization Initiative will be established. We will work to facilitate both outbound and inbound visits to promote broader international people-to-people exchanges and cooperation.”
What is covered under improving people’s well-being?
This is quite a meaty section. It deals with employment, social security, real estate, health, education and population policy, etc. Key exerpts:
“We will keep income distribution and the means of accumulating wealth well-regulated, open more avenues for urban and rural residents to increase their property incomes, and put in place systems to effectively boost the incomes of low-income earners, steadily expand the size of the middle-income group, and properly regulate excessive incomes. We will further reform the salary-setting mechanism for SOEs and rationally determine and strictly regulate the remuneration standards, allowances, and benefits for SOE executives at all levels.”
“We will refine the mechanisms for financing basic old-age insurance and basic medical insurance and for adjusting the benefits of both as appropriate. Basic pension benefits for rural and non-working urban residents under the basic old-age insurance scheme will be raised gradually. We will build a sound social security system to serve people in flexible employment, rural migrant workers, and those in new forms of employment and expand the coverage of unemployment insurance, workers’ compensation, and childbirth insurance programs. We will see to it that all restrictions preventing people from accessing social security in the places where they work but do not hold permanent residency are lifted and that policies for transferring social security accounts are improved.”
“We will move faster to establish a housing system that supports both housing rentals and purchases and foster a new development model for the real estate sector. We will scale up the building and supply of government-subsidized housing to meet the essential need of salaried people for a home to live in. We will also work to support the diverse needs of urban and rural residents for better housing. Municipal governments will be given greater decision-making powers to regulate the real estate market, and based on local conditions, some cities will be permitted to abolish or reduce restrictions on housing purchases and to scrap relevant standards for ordinary and non-ordinary housing. We will carry out reforms to change the way real estate development is financed and to improve the advance purchase system for commodity housing. Improvements will also be made to the taxation system in the real estate sector.”
“We will refine the policy system and incentive mechanisms for boosting the birth rate and strive to build a childbirth-friendly society. We will work to bring down the costs of childbirth, parenting, and education, refine parental leave policies, introduce a system of childbirth subsidies, improve basic public services for childbirth and pediatric medical care, and further raise the childcare-related deduction for personal income tax. We will make greater efforts to develop a public-benefit childcare service system and provide support for employer-run nurseries, community childcare facilities, and home-based childcare…we will refine the policies and mechanisms for developing elderly care programs and industries. We will develop the silver economy and support the creation of diverse jobs tailored to elderly people. In line with the principle of voluntary participation with appropriate flexibility, we will advance reform to gradually raise the statutory retirement age in a prudent and orderly manner.”
What’s included in the ecological civilisation reform?
This covers ecological conversation, environmental governance and green development.
“We will implement the management system for ecological conservation redlines, improve the mechanisms for integrated protection and systematic governance of mountain, water, forest, farmland, grassland, and desert ecosystems, and develop multiple funding mechanisms for ecosystem protection and restoration. We will enforce the system of mandatory limits on the use of water resources and replace the water resource fee with a tax nationwide.”
“We will refine the mechanisms for realizing the market value of ecosystem goods and services. We will further reform the system of paid use for natural resources. We will advance comprehensive compensation for ecological conservation, improve the trans-regional compensation mechanism for ecological conservation, and take coordinated steps to promote compensation for environmental damage.
“We will optimize policies on green government procurement and refine the green taxation system. We will improve the systems for total resource consumption control and comprehensive resource conservation, as well as the system for recycling waste and used materials. Mechanisms for ensuring clean and efficient use of coal will be refined. We will accelerate the planning and development of a new type of energy system and improve the policies and measures for promoting the absorption of electricity generated from new energy sources into power grids and for the regulation of such energy.”
“Improvements will be made to the working systems for adapting to climate change. New mechanisms will be put in place to facilitate the transition from controlling the total amount and intensity of energy consumption to controlling the total amount and intensity of carbon emissions. We will establish a carbon emissions statistics and accounting system, a carbon labeling and certification system, as well as a carbon footprint management system. We will also improve the cap-and-trade system for carbon emissions and the trading system for voluntary greenhouse gas emissions reduction.”
How to improve national security system and capacity?
“We will improve the legal, strategy, policy, and risk monitoring and early warning systems for national security, the systems for safeguarding security in key sectors, and the coordination and command systems for major projects. We will create a coordinated and highly effective system for protecting national security and better leverage science and technology to safeguard national security.”
Among other things, the section deals with disaster prevention and mitigation. Also worth noting is that the Fengqiao model for promoting community-level governance in the new era features in this context. In other words, this is not about improving governance as much as is about regime security.
“We will establish sound coordination mechanisms for promoting security in neighboring regions. We will strengthen the institutions and mechanisms for early warning, prevention and control, and protection against risks to China’s interests and investments overseas and deepen international law enforcement cooperation in the realm of security, so as to protect the lawful rights and interests of Chinese citizens and legal entities overseas. Mechanisms for countering foreign sanctions, interference, and long-arm jurisdiction will be strengthened. We will enhance the mechanisms for safeguarding China’s maritime rights and interests, as well as those for China’s participation in global security governance.”
How to deepen national defense system and military reform?
“We will improve the institutions and mechanisms for implementing the system of ultimate responsibility resting with the chairman of the Central Military Commission (CMC) and continue to enhance political loyalty in the military. We will optimize the functional setup of CMC departments and improve the mechanisms for coordinated advancement of military operations, capacity building, and combat preparedness. We will refine the consultation and evaluation mechanisms for major decisions, develop new approaches to strategic management, and improve the military governance system. We will improve the working mechanisms for running the military in accordance with the law. We will refine the supporting policies and systems for military operations, combat preparedness, military human resources, and other fields. The reform of military academies will be deepened in a bid to fully harness their potential. Military-affiliated enterprises and public institutions will also undergo adjustment and reform.”
“We will optimize the composition of the command centers for joint theater operations and improve the configuration of commands for joint taskforce operations. We will better coordinate the development and application of the network information system. To develop a new framework of services and arms, we will speed up the development of strategic deterrence forces and strive to develop new-domain forces with new combat capabilities, while making coordinated efforts to strengthen traditional combat forces. The composition of the armed police force will be improved.”
“We will improve the mechanisms for submitting and reporting on defense-related military needs and enhancing military-civilian alignment and refine the national defense mobilization system. Reform of the defense-related science, technology, and industry systems will be deepened to upgrade the layout of these areas. We will refine the system for weaponry and equipment procurement, develop reward mechanisms for designing military products, and modernize our weaponry and equipment management system. We will improve the mechanisms for coordinating standards between the military and civilian sectors. We will better coordinate development and management in aerospace, military trade, and other fields. We will optimize the institutions and mechanisms for leading and managing border and coastal defense and improve mechanisms to enable the Party, the government, the military, the police force, and the people to work together on border governance.”
Finally, how to strengthen Party leadership?
“We must acquire a deep understanding of the decisive significance of establishing Comrade Xi Jinping’s core position on the Party Central Committee and in the Party as a whole and establishing the guiding role of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era. We must be more conscious of the need to maintain political integrity, think in big-picture terms, follow the leadership core, and keep in alignment with the central Party leadership. We must stay confident in the path, theory, system, and culture of socialism with Chinese characteristics. 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.”
“We will refine the mechanisms through which the major decisions and plans of the Central Committee are implemented, in order to ensure full compliance with its orders and prohibitions. Party committees (leading Party members groups) at all levels are responsible for implementing the Central Committee’s decisions and plans, planning and advancing reforms in their regions and departments, encouraging pioneering efforts and innovations based on their own situations, and creating new experience that can be applied elsewhere.”
“We will further arm ourselves with the Party’s new theories and set up sound long-term mechanisms for reinforcing commitment, acquiring knowledge, improving conduct, and enhancing performance through learning. We will further reform the management system for officials and personnel and firmly follow the right approach to selecting and appointing officials. Officials who are politically committed, highly responsible, determined to pursue reform, outstanding in performance, and honest and clean, must be selected; and the problem of officials acting arbitrarily or lacking the willingness, courage, or ability to deliver must be addressed. We will see that officials have a correct understanding of what it means to perform well and improve the mechanisms for effectively preventing and correcting any misguided views about achievements.”
“We will strengthen the political and organizational functions of Party organizations. We will look into effective ways of Party building in new types of economic and social organizations and among groups in new forms of employment.”
“Steps will be taken to advance national anti-corruption legislation, revise the Supervision Law, and formulate a law on countering transnational corruption.”