China’s leaders set out their intention to push forward with policy reform following the Third Plenum. The full decision released on 15 November makes clear the aim to loosen constraints on the market, and suggests a dilution of state-owned enterprise influence. A new national security committee could also lead to greater policy integration between domestic security and international affairs.

The Third Plenum of the Chinese Communist Party’s 18th Central Committee took place in Beijing from 9−12 November. Initial reactions based on the communiqué released on the last day of the meeting were mixed. However, on 15 November the authorities published the detailed decision approved by the plenum, and an explanation given to the plenum by Party General Secretary Xi Jinping – in which he acknowledged major problems facing China.

These documents make the implications of the plenum much clearer. In sum, it offers a clear political signal that as China’s fifth-generation Party leadership enters its second year, it is intent on taking forward a ‘comprehensive deepening of reform’ across a wide range of issues. As an indication of the importance of this, a new high-level ‘leading small group’ will be established to coordinate and oversee this process. The decision spells out various new measures, and reiterates many which are already part of the government’s agenda.

More market in the economy

The most important material is on the economy, where the decision makes clear that the leadership envisages a ‘decisive’ role for market forces, and the establishment of ‘fair and equal’ competition in the economy. This will provide a guiding principle for policy-making over the coming years.

One of the ways of achieving this is to reorganize the functions of government. Here the decision reiterates the themes which the government has been working on since Premier Li Keqiang took over in March this year, namely reducing or removing the need for government approvals to businesses, freeing up the investment environment, and allowing businesses and the market to take the lead unless there is a strong reason for government intervention. Better governance is a wider theme of the decision, covering the judicial system and reforms to the party’s disciplinary organs which would clarify leadership and accountability in anti-corruption investigations.

SOE reform

A possible impediment to market reforms is the power of China’s state-owned enterprises (SOEs), and the original communiqué gave the impression that nothing much would be done about SOEs. However, the ability of these so-called ‘vested interests’ to stymie market reforms has been weakened by the targeting of a number of senior SOE-related cadres in the party’s latest anti-corruption campaign, which began at the end of 2012.

Further, the detailed decision suggests further reforms are in the offing. Although the relevant section of the document begins by restating the leading role for state ownership, a series of subsequent policy aims could serve to dilute it, such as ensuring equality in property rights protection and competition; developing mixed (state and non-state) ownership through cross-shareholding and bringing private capital into state-led projects; shifting from managing SOEs to managing state investments in enterprises; better supervision of SOEs which operate in natural monopolies; and removing administrative monopolies.

International affairs

The decision talks about further opening of China’s economy, but the vast majority of the issues covered in the decision are domestic in nature, and announcements such as a further relaxation of birth control policies have attracted most attention. Even the points on military and defense issues relate more to internal management than external capacity.

There was, however, one announcement which could have important implications for China’s foreign policy, which will be watched carefully outside China, the establishment of a ‘national security committee’. Xi said that this was being set up in response to external pressures to protect national sovereignty, security and development. He also cited internal pressures to maintain political security and social stability. It is too early to judge what the exact remit of this body will be, but it could lead to greater policy coordination and integration between domestic security issues and international affairs, at a time when China is playing a more important role across the international spectrum.

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