Liberalisation agenda of Communist Party plenum indicates direction Xi Jinping intends to steer China

Freeing up land ownership, liberalisation of state-run industries and changes in rules governing migrant workers' rights are expected to figure among the raft of reforms introduced by China's ruling Communist Party at a key meeting of the Central Committee this weekend.

The plenary session will be the first main indication of what direction President Xi Jinping, who became China's top leader a year ago, plans to steer the country.

Starting on Saturday, the Third Plenum of the 18th Communist Party of China (CPC) gathers the politburo's seven-member standing committee and the 205 members of the central committee, and will provide a forum for China's new leadership to detail its plans to "comprehensively deepen" financial reform.

China’s economy is in a gradual rebalancing phase, according to the government, and Beijing has repeatedly said it is prepared to accept slower economic growth as it tries to wean the economy off dependence on investment and exports in favour of domestic consumption.

The internal workings of the Communist Party can be arcane, but Third Plenums are a platform for a new leadership to introduce policy, after the First Plenum introduces the new leaders and the Second Plenum deals with personnel issues.

Economic liberalisation
It was the Third Plenum in 1978 that brought in Deng Xiaoping's economic liberalisations, which formed the basis of China's economic rise, as well as the launch of Zhu Rongji's socialist market economy in 1993.

“We must properly handle the relations between reform, development and stability, and with greater political courage and wisdom, further open our minds, unleash and develop social productivity, and enhance the creative forces of the society,” President Xi Jinping told overseas business executives.

There had been speculation that Mr Xi might be considering political reform, but that looks unlikely.

Writer Zhang Lifan, who suffered himself during the Cultural Revolution, believes the plenum is unlikely to bring about any changes in political policy.

"This plenum will be mainly economic reforms. For example, State-owned Enterprises will give some space to private companies. Second, the free trade zone will expand from Shanghai to other places. Thirdly, there will be some land reforms in the rural areas," said Mr Zhang.

“They will make a framework at the plenum, but won’t be an exact route how to do it. Politically I don’t think there will be any reforms. It will be still to maintain the role and position of the Communist Party. There might be some reform of the administrative system. On the whole, it is politics left, economic right,” said Zhang.

In a statement released ahead of the meeting, the Party has promised that the scope and aggressiveness of the reform plan will be “unprecedented” and the impact on all aspects of the economy and society will be “profound”.

"We should let labour, knowledge, technology, management and capital unleash their dynamism, let all sources of wealth spread and let all people enjoy more fruits of development fairly," said Yu Zhengsheng, chairman of Chinese People's Political Consultative Congress (CPPCC), a top advisory body.

“The depth and strength of the reforms will be unprecedented and will promote profound changes in every area of the economy and society,” said Mr Yu.

The plenary session will see the CPC work to speed up development of the socialist market economy, democracy, cultural development, social harmony and environmental protection, he said.

A key reform is expected to be land reform. Chinese farmland is still held in collective ownership, and farmers are not allowed to own the land they work and live on, but one possible reform could see land use rights extended to millions of rural families.

The policy document contained recommendations which would grant farmers the right to trade collectively owned land under a unified open market, which would equally value urban and rural land.

State-owned enterprises
Huang Shuhe, vice-chairman of the State-owned Assets Supervision and Administration Commission (SASAC), said that another important area of reform would involve the state-owned enterprises (SOEs). He indicated that the direction should be "a departure of government functions from enterprise management and capital".

SOEs would be encouraged to introduce private and strategic investors in pushing ahead with shareholding reforms, he said, while supervision of the state-assets should be beefed up to stimulate growth of the SOEs.

SOEs are suffering from falling profitability – profits fell 2.9 per cent year-on-year in the first eight months, SASAC data showed.

The “hukou” residence permit system is also expected to be relaxed further.

Currently many benefits are tied to one’s place of residence, which is a big disincentive to moving. Reform of the hukou system would allow more migrant workers to come to the cities to work, giving fresh impetus to the pace of urbanisation.