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When China's ruling elite gathered in Beijing for the long-awaited Third Plenum, all eyes were on how they would address the country's economic challenges. Would bold reforms be announced to steer the world's second-largest economy through troubled waters? Or would stability be prioritized in the face of multiple crises, including a real estate meltdown, high youth unemployment, surging government debt, and complex trade and geopolitical tensions?
The plenum, held every five years to chart the course of China's long-term social and economic policies, is shrouded in secrecy. Yet, one topic dominates the discussions: the sharp slowdown in economic growth, the slowest since the first quarter of 2023. This slowdown is fueled by weak consumer demand, a collapsing property sector, and mounting local government debt.
It's clear that China needs to change its development model. The consumer sector is repressed, and income generation, which fuels higher consumer spending, needs strengthening. Could this mean a shift in asset ownership from the public to the private sector? President Xi Jinping seems to favor such a move, alongside harnessing "new quality productive forces" – essentially, a plan to build high-tech factories with robots and automated machines to fill the labor shortage gap.
But DW's China analyst Clifford Kunan cautions that while Xi talks up the private sector, the reality is more focused on the state sector. "We've seen tycoons like Jack Ma from Alibaba disappearing for years," he notes, indicating a clampdown on the private sector. So, where does this leave the plenum and its potential for bold decisions?
A major problem China faces is government debt. Local governments have been racking up enormous off-the-books debts, some estimating it could be up to $11 trillion – about twice the size of the central government debt. These debts make it challenging to encourage growth, let alone implement sweeping economic reforms.
As the plenum wraps up, it's unclear whether any big announcements will materialize. Yet, one thing is certain: China's economic challenges are complex and multifaceted, requiring not just short-term fixes but a comprehensive, long-term strategy. The question remains: Will the Third Plenum mark a turning point, or will it be just another meeting among many, with more talk than action? Only time will tell.
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