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A Developing China in Conflict: Summary of the Sixth Plenary Session

11 November 2016tag:Sixth Plenary Session, 18th CPC CongressAuthor: Yuan Associates



The Sixth Plenary Session of the 18th Communist Party of China Central Committee (“Party Congress”) focuses on running the Party with discipline. The meeting further integrated the Party and confirmed President Xi Jinping’s core leadership in the CPC Central Committee. Since the beginning of this administration, the CPC has made great efforts to tackle corruption and win back the support of citizens. However, anti-corruption measures that were once temporary now need to transform into institutionalized measures for the long-term. With this in mind, the Sixth Plenary Session is attempting to solve this problem through further strictly governing the Party.


The Meeting’s “New Situation”


The Sixth Plenary Session aims to strengthen the intra-Party norms of political life and overall supervision to address the challenges under the new situation facing the Chinese social and economic situation. Economically speaking, although China has experienced a lower economic growth in recent years due to domestic structural problems and sluggish external demands, the trends of maintaining a steady economic growth, a stable employment rate, and gradual improvements in economic structure and quality are improving. Politically speaking, China's political system reform is lagging behind, while the process of market reforms and opening up is slowing down or even stagnant. The main reasons are:


• Without institutional restrictions, the rapid development of China's economy is rampant with political corruption. This has given rise to public dissatisfaction and hit the Party's core leadership. And, at the same time, the lagging political reform has also hindered the economic system reform from advancing further. 


• Powerful interest groups have strong resistance against reforms, and the motivation to pursue political system reforms is weak. At present, all social classes in China generally hold a unified opinion regarding reforms. The CPC, the government, and the SOEs have little intention to promote the reforms. However, the emerging middle class and intellectual groups are advocates of promoting reforms, but lack political influence. Last but not least, farmers, who account for 750 million of China’s population, are stuck in the middle.


• The leaders’ attitude towards political and economic reforms is not consistent. The leaders play a decisive role in China, where the governance is dominated by people, instead of the rule of law. This administration benefits from reforms and opening up, and at the same time, as the Red generation, they are highly convinced that only the CPC can lead China ahead. These characteristics create a conflicting situation in them, and also cause conflicts in policies they enact. 


Key takeaways of the Meeting


The meeting officially confirmed Xi Jinping’s leadership in the Party. Notably, the meeting has called on all party members to "closely unite around the CPC Central Committee with Comrade Xi Jinping as the core." This differed from the previous statements that “all party members should be united around the General Secretary of Comrade Xi Jinping as the core”. This proves that after three years of being in power, Xi has successfully intergrated the Party Central Committee of this administration and fully consolidated his core leadership. This is expected to pave the way for the First Plenary Session of the 19th Party Congress in 2017, which will elect the new party leadership for the next five years. 


The Party’s anti-corruption strategy will shift from campaign-based to a more institutionalized approach. The Sixth Plenary Session approved the aforementioned two documents, which aim for a two-pronged strategy to regulate and supervise both internally and externally. It plans to promote the transformation from temporary change in anti-corruption to permanent and institutionalized change. However, when it comes to the party members’ self-awareness and transparency in public supervision, only time will tell whether the Party’s power can be properly constrained. In addition, how to make the entire government system revitalize itself amidst the backdrop of corruption is still a big challenge to the Party.


The Fourth Pillar of the Party’s Strategic Blueprint for Governing the Country. As the strategic blueprint for achieving the “Chinese Dream,” the “Four Comprehensives” was presented by Xi Jingping for the first time in 2012 and includes four main areas: comprehensively deepening the reform (“let market play the decisive role”, proposed at the Third Plenum); comprehensively enacting the rule of law (proposed at the Fourth Plenum); comprehensively building a “moderately prosperous society” (The 13th Five-Year Plan 2016-2020, proposed at the Fifth Plenum); and comprehensively strengthening the Party’s self-discipline (The Sixth Plenum). After the Sixth Plenum, the current Party leadership has completed the deployment of their strategies to govern the country.


The Possible Impacts to MNCs


Despite concerns of the Party’s power being consolidated and inability to meet the expectations of reforming the political system fundamentally, the sixth plenum has a positive side, particularly in terms of political stability, which is crucial for MNCs business operations in China.


First, the Sixth Plenary Session has brought stability to society, while preventing a political unrest. It is clear that efforts in anti-corruption are currently effective. The government’s power has been constrained, and this new order has won the support of the society. Overall, the Sixth Plenary Session has helped maintain social stability and lower risks of a political uprising.


Second, the Sixth Plenary Session is conducive to maintaining the constant direction of market economy reforms. The principle of deepening reforms and allowing the market play a decisive role proposed by the CPC Central Committee will not change. “Strengthening the Party’s self-discipline” has potentially limited administrative interference into market operations, which will further release the vitality of the market economy.


Third, the political centralization embodied in the Sixth Plenary Session is worth noting. The situation of economic development in China being dominated by the government has not changed fundamentally. It is clear that the political reform is becoming more conservative, whereas economic reforms are more liberal. All of this has increased the uncertainty of China’s future development.


Fourth, China’s economic risks and uncertainties are still prevalent. Currently, China’s economy is in facing long-term downward pressure, and the setbacks of its domestic market situation have not changed. The unstable and risky factors, such as the long-term fluctuations of the RMB exchange rate, the increasingly high corporate costs (i.e. land and human resources) are still prevalent. For these reasons, MNCs operations in China should be well prepared to control the risks and face the challenges.


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