China’s Third Plenum: What to Watch for Foreign Investors

Posted by Written by Arendse Huld Reading Time: 6 minutes

China’s Third Plenum, one of the most important political meetings of the Chinese Communist Party, is expected to unveil a range of economic reforms and policies to address long-standing issues hindering growth and recovery. While reforms are expected to be modest, they will nonetheless have a substantial impact on the country’s trajectory and could affect businesses operating in the country.


The third plenary session of the 20th Central Committee of the Chinese Communist Party (CCP) will be held from July 15 to 18 behind closed doors in Beijing.

The third plenum, which was confirmed in a meeting of the Politburo of the Central Committee on June 27, is expected to be focused on deepening economic reforms to address a range of pressing issues facing China’s economy and society.

In this article, we explore key aspects that could affect businesses operating in China or those planning to enter the Chinese market.

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What is a Central Committee Plenum?

The CCP plenums are quasi-annual meetings held by the Central Committee. After the National Congress, which is held every five years and elects the Central Committee, they are the most important and high-level political gathering in China.

While the first two plenums during a Central Committee’s five-year tenure normally focus on approving members of the Central Committee Politburo and the seven-member Politburo Standing Committee, as well as appointing candidates to leadership positions within state institutions, subsequent plenums are much more policy and reform-oriented. Historically, these plenums have been the platform from which the government launched seminal policies and decisions, such as the “reform and opening up policy” in 1978 and the easing of the One-Child policy in 2013.

The third plenum is, as the name implies, the third plenum of the 20th Central Committee of the CCP, which has been in session since the 20th National Congress held in October 2022.

Plenums are usually held in the fall each year, but the expected plenum in October 2023 did not materialize and has been postponed until now.

What can businesses expect from the third plenum?

During the third plenum, the Central Committee will approve a draft document titled The Central Committee’s Decision on Further Comprehensive Deepening of Reforms and Advancing Chinese-style Modernization. The draft document was formulated and revised based on opinions from within and outside the Party, according to the readout of the Politburo meeting on June 27. This document will outline the planned economic reforms for the coming years.

Although past plenums have seen major reforms and policy decisions, the Committee is not expected to announce any drastic pivots at this year’s meeting. Instead, more granular reforms that align with the country’s current development trajectory may be announced in key target sectors, such as the private sector, technology, and property.

Promoting new-type industrialization and ensuring supply chain resilience

The third plenum report is expected to focus in part on policies to promote the “new-type industrialization” policy. This initiative seeks to move China’s industries up the value chain and boost their global competitiveness by focusing on digitization, advanced manufacturing, secure supply chains, and developing core and emerging technologies.

While this initiative was first introduced in 2002 during the 16th National Congress, it has become an increasingly important aspect of China’s industrial policy in recent years. In September 2023, China’s President Xi Jinping stated the “vital role of high-quality development in advancing new-type industrialization,” emphasizing the need to adapt and lead the ongoing scientific and technological revolution.

According to analysts from CITIC Securities, the third plenum may therefore announce policies related to promoting high-end, intelligent, and green manufacturing processes, consolidating existing industrial strengths and expanding strategic emerging industries, and proactively developing industries of the future to stay ahead in global technological and industrial revolutions.

External factors are anticipated to encourage reinforcement of China’s internal competencies, especially in the technological sector, aiming to enhance the robustness and self-reliance of vital industrial and supply networks. In recent years, the US and the EU, as well as other allies, have increased pressure on China by introducing a variety of policies aimed at countering China’s growing influence in key supply chains. These include the US’s curbs on key technology exports to China and recent tariff hikes, as well as the EU’s growing scrutiny of various Chinese imports.

To mitigate this, the Central Committee may prioritize enhancing domestic high-end, intelligent, and green manufacturing, consolidating advantageous industries, and fostering strategic emerging industries, such as semiconductors, alongside encouraging collaborative innovation across the industrial chain.

Meanwhile, China has been proactively building economic relationships with countries in Southeast Asia, Africa, Latin America, and Eastern Europe to strengthen its supply chain resilience. This strategy is expected to remain steadfast in the short term.

Promoting private sector recovery

The private sector is a crucial pillar of the Chinese economy, accounting for a significant portion of the country’s GDP (accounting for 60 percent of the country’s GDP in 2023), employment, and innovation.

However, the private sector has experienced uneven recovery since the COVID-19 pandemic, with private companies falling behind their public counterparts across measures such as value output and investment. In 2023, fixed asset investment by private companies fell by 0.4 percent year-on-year, compared to a 6.4 percent year-on-year increase for the public sector, according to the National Bureau of Statistics (NBS).

The third plenum is therefore expected to announce new policies to support the growth and recovery of the private sector, with possible initiatives including ensuring equal treatments for state-owned and private enterprises through institutional and legal frameworks, protecting the property rights and interests of private entrepreneurs, and supporting the growth of small, medium, and micro-enterprises, as well as individual businesses.

It may also seek to encourage private investment by improving financing support for private projects and implementing measures to enhance fair market competition and reduce administrative barriers. We may also see commitments to enhance regulatory frameworks to ensure fair competition and prevent monopolistic practices, in line with previous policy measures to shore up the private sector.

Measures to boost foreign investment

Another potential focus of the third plenum is further policies to boost foreign investment. Foreign direct investment (FDI) in China has been under pressure in the years since the COVID-19 pandemic, with actual use of foreign capital falling 8 percent year-on-year in 2023 (the number of newly registered foreign companies grew by 39.7 percent year-on-year somehow, with a total of 53,766 new foreign invested enterprises registered).

Since 2023, the government has issued several policy documents outlining measures to boost foreign investment, most recently with an action plan released in March 2024.

It is possible that we will see similar commitments to improving the environment for foreign businesses in China. Potential policies might include further expanding market access, particularly in the modern services sector, and ensuring national treatment for foreign enterprises, enabling their equal participation in government procurement, bidding, and standard setting.

There may also be efforts to direct foreign capital towards its target development industries, such as advanced manufacturing, energy conservation, and high-end technology, as well as toward the central and western provinces.

Fiscal policy and market reform

While major market reforms are not anticipated, we may still see efforts for policies focusing on improving what China called the “unified national market” and enhancing marketization across various sectors in China.

The construction of a national unified market was first proposed in the 14th Five-Year Plan (FYP) in 2021 and aims to improve market efficiency and unity across the country by breaking down local protectionism, standardizing rules and regulations, and removing market barriers restricting the economic cycle.

Key initiatives announced in the third plenum may include further refining property rights protection, streamlining market access regulations, and promoting fair competition by eliminating monopolistic practices.

Meanwhile, it is also expected that the Central Committee will seek to optimize the tax structure and refine fiscal transfer payment systems to better support regional development and economic equality.

In terms of fiscal policy, reforms may concentrate on improving the allocation of fiscal responsibilities between central and local governments, enhancing transparency in budget management, and refining tax systems. There could be decisions to expand consumption tax or VAT, as well as measures to manage local government debts more effectively and augment the effectiveness of fiscal transfers. Additionally, regulatory improvements are anticipated to fortify financial institutions, ensuring they adhere to prudent risk management practices and operational transparency.

It is critical for companies to closely watch the upcoming announcements made during the third plenum, as they will likely outline significant policies impacting various sectors within China. For companies operating or planning to enter the Chinese market, these announcements will provide crucial insights into regulatory changes, market access conditions, and investment opportunities. Adapting to these developments will be essential for navigating China’s evolving economic landscape and seizing growth opportunities.

China Briefing will continue to cover and provide a detailed analysis of the announcements made during the third plenum.

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China Briefing is one of five regional Asia Briefing publications, supported by Dezan Shira & Associates. For a complimentary subscription to China Briefing’s content products, please click here.

Dezan Shira & Associates assists foreign investors into China and has done so since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Haikou, Zhongshan, Shenzhen, and Hong Kong. We also have offices in Vietnam, Indonesia, Singapore, United States, Germany, Italy, India, and Dubai (UAE) and partner firms assisting foreign investors in The Philippines, Malaysia, Thailand, Bangladesh, and Australia. For assistance in China, please contact the firm at china@dezshira.com or visit our website at www.dezshira.com.