Third Plenum Decision: impressive and bold

Third Plenum of 18th CPC Central Committee Congress

On the heels of the release of the Third Plenum Decision the European Union Chamber of Commerce in China has issued the following statement:

The European Chamber is impressed by the breadth of reforms laid out in the Third Plenum Decision and what it represents in terms of the political will of China’s top leadership. The Third Plenum Decision went beyond the European Chamber’s expectations by giving greater play to the role of market forces in resource allocation, and by vowing to liberalise interest rates and reduce market access barriers.

While the earlier Communiqué of the Third Plenum laid out some of the groundwork for reform, it lacked detail. The 21,000-plus character Decision provides much of the clarity for which the European Chamber was looking. Many of the proposals in the Decision echo the European Chamber’s recommendations in our Executive Position Paper issued in September, in particular the strong argument that the state must step back in order to strengthen market forces, although there are still concerns over the dominant position still identified for state-owned enterprises as well as a lack of clarity about sectors for which access will be opened to foreign enterprises.

The Decision provides a wide-ranging and ambitious plan, but the hardest steps are still ahead. China now has the blueprint that should allow for a successful rebalancing of its economy and sustainable growth going forward. The government must be resolute and have the courage of conviction to fully follow through on these reforms. Its success now critically depends on implementation.

European Chamber President Davide Cucino said, “European industry has many of the tools and solutions needed to foster sustainable, high-quality growth. We look forward to the issuance of implementation guidelines from the ministries and, in particular, to greater market access so that European industry can fully contribute to China’s economic and societal development. The full benefits of further opening up can only be realised if access is granted to all players, and not simply domestic companies, as is frequently the concern of our members. However, overall this is a positive document.”

President Cucino also stated that, “There has for some time largely been consensus about the need for the government to cede political control to the market. The Decision shows that there is now a political resolve and a general roadmap for many of the important steps to be taken. All the reforms listed in the Decision should be considered to be part of a dynamic loop: if one is not implemented fully, it risks adversely affecting all of the others. We welcome the changes, but they are overdue. The river is swelling. Crossing it by feeling for stones is prudent, but the choppy waters mean that it may also be dangerous to wait.”