Wang Tao: Initial Assessment on What the Third Plenum Revealed About China’s Long-Term Reform Goals

### Summary

The recently concluded Third Plenum in China on July 18, resulted in a brief communique which aligned with the existing government policies and leadership speeches, with minimal new content. The communique reiterated China's aim of achieving basic “socialism modernization” by 2035, emphasizing the importance of sustained economic growth over the next decade [para. 1][para. 2].

The government reaffirmed the need for better resource allocation by allowing the market to play a significant role while also ensuring the government's part in maintaining market order and correcting failures. The communique espoused equal access to production factors like capital, land, and labor, for both state-owned and non-state-owned enterprises (non-SOEs), along with fair market competition and equal legal protection. An accelerated legislative process for supporting the private economy is anticipated, which could bolster investor confidence. However, detailed plans related to structural reforms in fiscal, tax, and financial areas are expected to be unveiled in the complete report [para. 3][para. 4].

High-quality development remains a priority for China, focusing on productivity growth, integrating the digital economy with the real economy, and strengthening key supply chains. Innovation and education are given high importance as foundational elements for achieving these goals. The government is expected to introduce detailed plans to promote this high-quality development, including specific supportive policies and increased spending on research and development, education, and training [para. 5][para. 6].

The communique highlighted integrated urban-rural development, emphasizing new urbanization and the equal flow of resources between urban and rural areas. Anticipated reforms include reducing hukou restrictions in most large cities to bridge the disparity between hukou and residence urbanization ratios, and more dynamic land market regulations to accommodate new urbanization. Enhancements in social welfare, basic public services, income redistribution, and healthcare reform were also discussed, hinting at ongoing efforts to achieve "common prosperity" indirectly [para. 7][para. 8].

The Plenum reaffirmed China's commitment to deepening its opening-up and welcoming foreign investment, which is perceived to assist in domestic structural reforms. Proactive support and protection of foreign investment, reduced market entry barriers, bolstered trade, and outward investments are core components of this strategy. This move is also viewed as crucial to buffer against potential economic risks from renewed U.S. tariffs by broadening export markets and mitigating the negative impacts of continuous U.S. technology restrictions [para. 9][para. 10].

Wang Tao, Chief China Economist at UBS Investment Bank, provided these insights, which reflect his views and not necessarily those of Caixin Media. The platform welcomes opinion contributions from readers [para. 11][para. 12].