China Reboot

Written by The Financial Express | Updated: Nov 11 2013, 07:26am hrs
After his rehabilitation in 1977, Deng Xiaopings first significant move was the ouster of Hua Guofeng, Mao Zedongs chosen successor. The next year, in December, the Communist Party of Chinas (CPC) Third Plenum unveiled Dengs vision of a modern yet socialist China with the adoption of his economic reforms and open-door policy. Chinas rise as an economic giant and the importance of the CPCs Third Plenum were both irrevocably determined from that December of 1978. A decade and a half later, in 1993, the third plenary session made China a market economy with socialist characteristics. Chinas global stature today goes back directly to that plenum.

As president, this is Xi Jinpings first Third Plenum and the expectations are high because Chinas new leaders are about to present a new economic blueprint for the country, which is likely to address long-standing issues of combining growth with distributive fairness, as well as addressing ecological issues. However, while the reforms this year are expected to be more comprehensive than seen in recent times, it would be missing the wood for the trees to focus on the headaches, such as growing income inequality, disparate access to healthcare and other services. The new leadership knows that despite the need to move beyond the strict emphasis on GDP growth at the last several third plenary sessions, Chinas real challenge at the moment is tackling the slowdown and refocusing the economy from increasingly unreliable exports and capital-intensive investments to domestic consumption and services. Another key area seeking reform is the financial sector, wherein the interest rate policy and tight control of currencys convertibility need to be liberalised.

So, while China has a Gini index higher than Indias, it might be overdoing things to rank the 2013 Third Plenum with those of 1978 and 1993. The plenum ending on November 12 will likely see major steps to overhaul the economy. What, for certain, will be missing is political reform, notwithstanding the increasing number and frequency of mass protests that underscore the deepening socio-economic faultlines in the worlds second-largest economy.