The Third Plenary Session of the CCP Failed

The much-anticipated Third Plenary Session of the Chinese Communist Party (CCP) concluded earlier this month. Historically, the Third Plenary Session of the 11th Central Committee in 1978 was pivotal in transitioning China from the Mao era to reforms and opening up. This latest session garnered significant interest, especially due to its delay and China’s current economic downturn. Many hoped for new policies to address economic issues, but the results were disappointing, largely because observers misunderstood the CCP’s model.

The Rise of the CCP’s China Inc.

The CCP operates as “China Inc.,” treating the entire country as a giant corporation with the Party as the owner and manager. All enterprises, whether state-owned or private, are subsidiaries. State-owned enterprises (SOEs) are direct subsidiaries, while private enterprises function as joint ventures controlled by the CCP. Foreign investments are akin to franchisees. (RELATED: Reject China, Inc. — Not Trading With It)

Under this model, the CCP concentrates resources on developing targeted industries, acquiring foreign technology, and setting up protection mechanisms to prevent foreign competition. This strategy has succeeded in sectors like solar power, high-speed rail, and automotive batteries. China’s electric vehicles, for example, have rapidly gained global market share. The national corporation model has drastically impacted global trade, as competition typically occurs among private enterprises, not state-controlled entities.

China Inc. wields immense resources, combining governmental power with corporate flexibility. Furthermore, China’s total output has surpassed the United States (measured by purchasing power parity). This dominance affects any industry China enters, significantly impacting global markets.

China’s model features high production capacity and low consumption, necessitating the export of surplus products. The CCP depresses wages and the RMB exchange rate, making Chinese products cheap globally. Despite low wages and overwork, Chinese citizens have no option but to obey, hoping they can gradually increase their incomes.

The key to this model is the CCP’s rule above the law and its dictatorial control, with no legally protected property rights. The CCP can confiscate property or enterprises at any time.

Challenges Facing the CCP

The CCP currently faces numerous domestic and international difficulties. Domestically, China’s economy is in crisis. The primary issue is a lack of confidence among people. Entrepreneurs are hesitant to invest, and citizens are reluctant to consume due to the CCP’s arbitrary actions against private enterprises and individuals. The zero-COVID policy has pushed the population to the brink and nearly bankrupted the economy.

Today, passive resistance and “lying flat” are common attitudes among the public and officials. The CCP has not adopted significant economic stimulus policies, hoping the private sector will resolve issues independently. (READ MORE Governance in Gaza and the West Bank: What to Know)

Internationally, there is growing distrust and vigilance towards China. Countries are increasingly aware of the dangers posed by the CCP’s model and are taking steps to decouple from it. Many nations are establishing alternative supply chains to reduce dependence on China and counter the CCP’s use of trade as a political tool. China Inc.’s international prospects are grim, especially if Trump returns to power.

For the CCP, closing its doors is terrifying because, without international trade profits, it cannot placate the masses economically. This could lead to a zero-sum game between the ruling class and the governed, potentially resulting in internal conflict. The CCP fears decoupling from developed countries like the U.S. and Europe, as this would exacerbate domestic economic decline and public dissatisfaction.

Third Plenary Session: Hope or Hype?

Faced with these challenges, what measures has the CCP introduced at the Third Plenary Session?

The first measure is to strengthen the Party’s leadership and bolster Xi Jinping’s authority. The second measure is to re-emphasize “reform.” Strengthening the Party’s leadership and establishing Xi’s authority offers no economic benefits and may further frighten private enterprises and citizens. The emphasis on reform is ineffective because it does not aim to transform the socialist public ownership and dictatorial system into true private ownership and the rule of law. Instead, the reform aims to save the CCP and ensure its perpetual rule. The party may adopt capitalist measures and introduce Western capital and technology when the economy is on the brink of collapse, but this is merely a tactic to buy time, not a genuine embrace of Western democracy, freedom, and the rule of law. The party will not relax its grip and is willing to use military force to maintain its rule, as demonstrated by the 1989 Tiananmen Square massacre. (READ MORE: Former Trump Defense Official Makes the Case for Prioritizing Asia Over Europe)

If there is anything significant in the Third Plenary Session’s communiqué, it is two key phrases. The first is the acknowledgment of the “severe and complex international environment” reflecting the international challenges. The second is to “let firms thrive and control them effectively” (“放得活”又“管得住”) — more specifically, let the market play a role in resource allocation while ensuring the Party’s leadership remains absolute. This phrase is crucial because China Inc. concentrates national resources while encouraging enterprise activities. These show that the party actually recognizes the challenges it faces.

A Bleak Outlook

Given the global pushback against China’s national corporation model, what options does the CCP have? The best option would be to abandon the model, establish a supreme legal system, place the CCP under the law, and shift the government’s role from an economic player to a referee. This would mean relinquishing dictatorship, something the CCP has explicitly stated it will never do.

Therefore, I am not optimistic about China’s future. Without external pressure, the CCP will maintain its one-party rule indefinitely, even at the cost of economic collapse. The phrase “China has entered the garbage time” went viral because it reflects the belief that the CCP will not change its course. Since the beginning of reform and opening up, the party has shown some flexibility in adopting market competition, but without true property rights and an independent legal system, China’s economy cannot break through its current bottleneck. This is why the Third Plenary Session is not worth paying attention to and will not introduce any substantive policies.

Shaomin Li is a Professor of International Business at Old Dominion University and the author of The Rise of China, Inc.: How the Chinese Communist Party Transformed China into a Giant Corporation.

 

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