China’s 18 – 3

That stands for the 3rd plenary session of the 18th Party Congress of the Chinese Communist Party (“CCP”) held 2 weeks ago in Beijing. I think it will likely go down in history as one of the most important events coming into the 21st century.

I have given you plenty of advanced notice about major reform initiatives to be announced “this fall” in my emails earlier this year. What unfolded at 18 – 3 exceeded most observers’ expectation (but not mine). The CCP’s Central Committee approved the Xi Jingping-led platform of “Deepening Reform Across-the-Board” in an unprecedented 5-inch thick report, containing more than 60 specific reform items. Western analysts now call them “sweeping”, “ambitious”, “unprecedented”.

To appreciate the alleged potential historic significance, you have to go back 35 years to 11 -3. That was the 3rd plenary session of the 11th Party Congress in 1978 that offcially enshrined Deng Xiaoping’s Reform and Opening Up Policies for China. From 1978, China’s GDP grew 140 times over the next 35 years (from approximately USD 365 billion to over USD 5 trillion this year) !

Self-admittedly, the Chinese leadership has reached a consensus that 18 -3 is to be the most historic session since 11 – 3 in that it is similarly aimed at transforming China toward a new future. However, it is not borne from a euphoric sense of success. Rather, it is an admission that the past 35 years are not only unsustainable, but that it has created a massive agenda of matters to be urgently fixed and fundamental restructuring to be undertaken across many spheres.

Unlike Obama’s rhetoric of “change”, you can bet that significant real changes will take place in China over the next few years, some will even be dramatic. In particular, the reform initiatives will be headed by so-called “small directing groups”, meaning they are made up of individuals as well as representatives from the relevant ministries, but are independent of the ministries, answer directly to the central leaders, and once a measure is approved, they will require the ministries to provide the requisite resources and perform their respective responsibilities. That will ensure that natural resistance to change and bureaucratic inertia are minimized. Prior consultation and field works among the broad masses have already been conducted, and will continue throughout the process.

At the end of the 18 – 3 session, it dawned on me that one thing is very different in this 3rd plenary from that of the 11 – 3. And that is the reality of big vested interest groups in China today. Unlike 35 years ago, when the country was very poor, there are now huge interest groups in China’s socio-political fabric as a natural result of economic advancements — there are the Oil interest, the Railroad interest, the Banking interest, the Telecom interest and the SOE (state-owned enterprise) interest. Even as they welcome and embrace change, they are certainly looking to protect their own fiefdom and block any measures detrimental to their largesse. They may play similar roles as their counterparts in the US, e.g., the military-industrial complex, the oil lobby, the HMO, Wall Street and the new-found network and data barons in the US have all but made a travesty of our democracy. Already, I noticed that 2 out of the 3 Politburo members on the drafting committee at 18 – 3 may count as proxies for old vested interests, and the reform-oriented Prime Minister (Li Keqiang) was uncharacteristically excluded from the steering group.

That would give any reformers nightmare.

– doublewood

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