How decisive will the third PCC Plenum be?

Growing anticipation for the PCC central committee’s third plenum is palpable.  The tribunal will convene in Beijing in November, and in accordance with tradition, it will probably lead to important announcements.  The 205 delegates emerging from the XVIII Congress will face an arduous and unpublished task full of consequences.  Expectations are legitimate; they trace their origins to issues that Xi Jin Ping’s administration must address.  The anticipation is strong because the problems are serious.  The collective curiosity seems to justify the initial question asked: why is a system that has revealed itself until now to be extremely valid in need of reform?  Why are they asking to reform something that has worked so well?  The instances are numerous, and involve all social spheres: from economic growth to the political system, from environmental protection to limitations on personal freedoms, from the needs of the urban classes to the peasants’ backwardness.  The tribunal concerns the party, not the government.  Despite the homogeneity between the two institutions, the former is compelled to provide a comprehensive answer that encompasses all aspects of society.  It needs to do this because the old development model is showing the first signs of inadequacy.  For many, Beijing has rested on the laurels of its economic growth.  It postponed many social issues on the grounds of its GDP, breaking records but neglecting a good number of requests on behalf of its citizens and its most dynamic segment of business people.  Now, these problems must be solved, because hiding behind the GDP can’t last forever; growth can become an obsession but no longer a therapy that hides larger syndromes.  Ironically, one of the biggest disputes will be the reduction of credit, as if China has become vulnerable like the rest of us.  A number of unresolved questions have aggregated around this hazard since China has begun experiencing the effects of the crisis and slowing growth.  Beijing’s exposure doesn’t have an exact value, but serious and independent analyses put that figure around 200% of the GDP.  It’s a frightening number, mitigated only by the owners of the debt, which—analogous to Japan—aren’t in foreign hands.   The explosion occurred with the gigantic maneuver in 2008, when the global economy was groping in the dark and the numerous havens for Chinese goods didn’t exist anymore.  Breathing life into internal demand signified indebting the country.  The effort saved the country, albeit exacerbating imbalances.  The new management will examine these problems and the next plenum in November will need to find solutions.  The most anticipated reform is Beijing’s assumption of direct responsibility for primary education and welfare, which is to say pensions and healthcare.  Spending splurges and thousands of different destinations are nestled there, beyond budget and control.  The capital believes that local governments are excessively independent, casual in spending and opaque in relationships.  A progressive accumulation of resources has created parallel powers, hidden by economic successes and the regularity of transfers.  The enormous flux of money that arrives at the periphery was frequently out of control.  The recent Bo Xi Lai scandal (the ex governor of Chongqing) is only the most dramatic example of this situation.  Making local governments more responsible without Beijing’s transfer security is the most pressing challenge.  In fact, it is believed that they will issue bonds to finance themselves—a possibility that is now prohibited—paying maximum attention to their own accounts.  In any case, they will need to get used to ratings, just like everyone else in the globalized world.  Just like the agency, Dagong, which finds clients outside of China, businesses and national administrations will need to get used to the scrutiny of auditing.  The maneuver’s framework is the rationalization of the mechanisms, abandoned to incompetence and procrastination, if not to the scourge of corruption, public enemy number one according to the current administration.  The committee’s task is not easy.  It will not be able to postpone reforms, but will need to proceed by degrees; if not, the entire structure of power could waver.  They will begin with objectives most within their reach, knowing that a complete revision of growth mechanisms and control is inevitable.  Unfortunately, revisions of the banking system (afflicted by bad debt) and funding favoritism for state-owned enterprises are not on the agenda.  They will be soon, however, along with other problems with a more pronounced social mark: single-child politics, stable registration in work units, and access to higher education.  The plenum will, therefore, open with ambitious but calibrated, radical but limited propositions; it will be an attempt to build a future while trying to avoid destroying the foundation they’re standing on.