Top officials of the Communist Party of China (CPC) held their annual meeting from July 15 to 18. This meeting, known as the Third Plenary Session of the 11th Central Committee of the Communist Party of China, has historically been used by the CPC to set the tone for important economic policy initiatives. At the Third Plenary Session of the 11th Central Committee in 1978, Deng Xiaoping led China away from Maoist isolationism, encouraged foreign businesses to enter the country, and gradually paved the way for China to become the second-largest economy.
An analysis of CCP documents reveals the tasks the CCP intends to accomplish in the next five years. First, Xi Jinping, as the CCP’s top leader, assesses that there have been major changes in recent years. He warns that the international situation is becoming uncertain and unpredictable, and that a “black swan” event could threaten the Party’s grip on power. For example, when the COVID-19 pandemic broke out in Wuhan, the Party and state’s response proved inadequate. The CCP has now resolved to strengthen mechanisms for dealing with such large-scale public emergencies. When Xi Jinping ordered the long-term closure of urban centers to combat the pandemic, Chinese youth took to the streets to protest against Party and state control. Now, the Party will work to build a unified national population management system to avoid being caught off guard.
Xi has pointed to the increasing frequency of regional conflicts and warned of worsening international problems. China has territorial disputes with its neighbors and plans to strengthen institutions managing the defense of its borders and coastal areas. He also seeks to improve mechanisms through which the party and government, the People’s Liberation Army (PLA), law enforcement agencies and civil society can cooperate on border management. This is significant for India, given that the PLA and Indian armies have been engaged in a standoff for the past four years and China has been building villages along the Line of Actual Control (LAC). He also aims to fine-tune the defense mobilization system, modernize the arms management system and strengthen military-civil cooperation.
China is at odds with its neighbors over territorial disputes and wants to strengthen institutions that manage the defense of its borders and coastal areas.
In recent years, under President Xi Jinping’s Belt and Road Initiative, Chinese companies have been setting up operations overseas. At the same time, after the outbreak of the Russia-Ukraine war, China launched the Global Security Initiative (GSI) in April 2022, referring to the concept of “indivisible security.” This means that one country’s security must not be at the expense of the security of others. President Xi Jinping pointed out that Western countries are trying to form factions along ideological lines to provoke conflict. Under the GSI, China aims to train security personnel from developing countries over the next five years and promote exchanges between defense and law enforcement training academies. This is also mentioned in the General Assembly resolution, which calls for strengthening protection against risks to China’s overseas interests and investments and establishing a coordination mechanism to promote security in China’s neighboring regions.
CCP elites are aware that there are negative perceptions of China. For example, a Pew Research Center survey found that a growing percentage of people in the United States describe China as an “enemy,” making curbing China’s power a key priority. The survey adds that China’s negative image is also due to deteriorating relations with neighboring countries and deep distrust of Xi Jinping. Chinese elites are therefore determined to improve China’s narrative power by restructuring China’s global communication framework and improving the efficiency of Chinese media to create a positive impression.
The Plenary Assembly resolution also signals China’s economic priorities. Xi assessed that China’s industrial system is not yet advanced enough and warned of growing attempts by the Western-led alliance to contain China, while warning of China’s over-reliance on core technologies dominated by its rivals. The Plenary Assembly collectively aims to further Chinese-style modernization and improve industrial capabilities. Efforts will be made to build resilience through stronger industrial chains of integrated circuits, industrial machine tools, medical equipment, and basic and industrial software. China calls for further reform of state-owned enterprises to enhance their competitiveness and increase investment in areas related to national security. The private sector is expected to strive to realize the Party and state priorities on further technological innovation.
The General Assembly resolution also signals China’s economic priorities, with Xi assessing that China’s industrial system is still underdeveloped and warning of growing attempts by the Western-led alliance to contain China.
China’s export-led strategy has transformed it into a production and assembly line for goods, propelling it to become the world’s second-largest economy. Going forward, China will work to improve conditions for what President Xi Jinping recently called “new productive forces.” New productive forces are defined as new industrial sectors and new business models resulting from a better allocation of production factors such as land, labor, capital, and technology. Plans are underway to create funding for “strategic” industries such as aerospace, new energy, biomedical, quantum technology, advanced information technology, and artificial intelligence (AI). While China works to strengthen these new productive forces, it will also ensure that capital is allocated to traditional brick-and-mortar industries to maintain the share of manufacturing in the overall economy.
China’s revitalized industrial policy requires a long preparation period, so the idea of ”patient capital” has been put forward. Capital will be provided through updated regulations on the development of angel investment, venture capital and private equity investment, and will make better use of the role of the Government Investment Fund, especially for important national science and technology programs.
China is facing demographic concerns as its population starts to decline from 2022 onwards. China is looking to weather this by increasing investment in human capital formation to upskill its citizens. The General Assembly resolution envisages reform of educational institutions to develop talent and build teaching capacity in basic and emerging fields that can boost China’s innovation capabilities. It also wants to introduce a vocational training system that is better suited to the needs of industry. Despite domestic criticism of the US for containing the country’s rise through a technology blockade, efforts will be made to attract foreign universities with high reputations in science and technology to partner with Chinese educational institutions. Domestically, China’s private high-tech universities will be encouraged to partner with university campuses and research institutes.
There are demographic concerns in China, as its population is set to start declining from 2022 onwards. China is trying to weather this by increasing investment in human capital formation to improve the skills of its citizens.
In conclusion, the message from the Third Plenary is clear. Xi Jinping envisions a strong role for the party in the economy and aims to initiate an industry-centric economic policy. With industrial policy coming to the fore, the Indian government has expressed concern that China could create excess capacity, driving down prices and hurting Indian companies, especially in sectors where China has an advantage.
Second, the Assembly aims to improve China’s narrative power by reshaping the mechanism of China’s international communication.
This needs to be considered in conjunction with the PLA’s recent move to create an intelligence support unit and the growing importance of the concept of “internet information system” to winning modern warfare. India therefore needs to be wary of Chinese disinformation campaigns. Finally, China is seeking to combine economic and security cooperation to forge alternative frameworks for expanding its influence through the domains of law enforcement capacity building and defense. In this regard, the objective of creating mechanisms to promote security in China’s neighborhood has direct security implications for India as it may mean aligning with organizations that counter India.
Kalpit A. Mankikar is a fellow in the Strategic Studies Program at the Observer Research Foundation.
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