Leaders of the Chinese communist party are meeting today for the Third Plenum, a meeting that aims to set the economic direction for the next five years.

What is the third plenum?

It's a key policy meeting held every five years to determine the country's long-term social and economic policies. The party holds a major congress twice a decade. Members of the central committee are elected at each congress. The 20th central committee was chosen at the last congress in October 2022.

Out of the seven plenums, the first, second, and seventh plenums typically focus on power transitions between central committees. The fourth and sixth plenums generally focus on party ideology. The third plenum generally focuses on long-term economic reforms. The third plenum in November 2013 focused on strengthening market forces to allocate resources. In February 2018, the party was urged to closely unite around the central committee with 'Xi' at its core.

However, China is at an economic crossroads as it hosts the third plenum meeting in Beijing, starting July 15.

What's at stake?

This key policy meeting comes amid the backdrop of lower-than-expected GDP numbers for the June quarter of 2024. China's growth engine is sputtering and needs a reform push to navigate the multi-faceted economic issues plaguing the country.

According to reports, Chinese policymakers are prioritising innovation over growth. The meeting is set to unveil a strategy to build a 'new quality productive force'. The strategy aims to focus on building cutting-edge technologies like AI & semiconductors. This focus underlines China's quest for AI supremacy amid rising trade tensions with the US and Europe. 

Apart from long-term planning, China also needs to focus on short-term economic issues. Growth is slowing, youth unemployment is surging, and a property market crisis is fuelling worries for the second-largest economy in the world.

‘We bought our house for around 870,000 yuan, but now it's just over 600,000 yuan if we sell it, because one of our neighbours just bought a flat which only costs around 600,000 yuan. it's the lowest the price has been in the last 10 years,’ Wang Dongmei, a Tianjin resident, told AFP on the rising property pressures.

In addition to promoting tech, the plenum will also tackle fiscal and tax reforms to support heavily indebted local governments. China's recent stimulus packages have failed to ignite demand and increase liquidity. The country is also pushing for a high-level socialist market economy that's more 'open'.

Xi Jinping announced his plans a month earlier. 'China's doors will only open wider and wider and will never be closed. We are planning and implementing major measures to further deepen reform comprehensively, further expand systematic opening up, and create a more market-oriented and international business environment.' he said at an event cited by AFP.