Plenum Explained: Beijing to Bolster Industrial Chains, Promote Private Sector

China’s top leadership unveiled a comprehensive plan aimed at deepening reforms to boost foreign trade, promote the private economy, and enhance the security of the nation’s industrial and supply chains, following the Communist Party of China’s Central Committee Third Plenum. This pivotal political gathering occurs twice a decade and establishes the country’s reform framework for the subsequent five years. The resolution from the plenum includes strategies to attract fresh foreign investments and set both private and state-owned sectors on an equal footing, especially at a time when China’s economy is experiencing a slowdown due to weak domestic demand and a prolonged real estate slump [para. 1][para. 2][para. 3].

One significant focus of the resolution is securing industrial and supply chains, pledging to expedite the construction of self-supporting and risk-controllable industrial and supply chains. Specific measures include bolstering key industrial chains like integrated circuits, industrial software, and advanced materials, relocating industries domestically, and refining systems related to strategic mineral resources. This focus is due to the escalating tech rivalry with the U.S., which has imposed stricter trade restrictions on China to limit its access to advanced technology. The industrial sector is a crucial pillar of China’s economy, contributing 31.7% of the GDP or roughly 39.9 trillion yuan ($5.5 trillion) last year. However, prominent shortcomings in areas like core technology and industrial infrastructure capacity still persist, highlighting the need for ongoing reforms [para. 3][para. 4][para. 5][para. 6].

The resolution also aims to deepen foreign trade and investment reforms by developing new regulatory approaches for customs clearance, taxation, and foreign exchange, controlling trade risks, and refining the export control framework. Additionally, it seeks to upgrade pilot free trade zones, accelerate the development of the Hainan Free Trade Port, and ease restrictions for foreign investment in the manufacturing sector. Such measures signal China’s intention to expand its high-level opening to the world, especially as net foreign direct investment plummeted to a 23-year low last year. These steps are meant to bolster confidence in China’s economic prospects and ensure equal support for both domestic and foreign-funded enterprises [para. 7][para. 8][para. 9][para. 10][para. 11].

The reform of state-owned enterprises (SOEs) is another critical part of the plan, calling for deepening reforms, improving management and oversight systems, and implementing value-added accounting. State capital will focus on industries crucial to national security and the economy’s lifeblood, public services, emergency response, public welfare, and forward-looking strategic industries such as AI, aerospace, and new energy. The aim is to support the equal competition of SOEs and privately owned companies. The traditional assessment system for SOEs will be replaced by a more tailored evaluation system that includes financial performance, market competitiveness, innovation capabilities, and social responsibility [para. 12][para. 13][para. 14][para. 15].

Furthermore, the resolution underscores support for private businesses by formulating a private sector promotion law, breaking down market access barriers, refining financing support policies, and ensuring participation in major national projects. Despite accounting for over 90% of market entities and contributing significantly to employment and GDP, private sector confidence remains low due to strict pandemic controls and regulatory crackdowns. Legislation similar to the Foreign Investment Law and State-Owned Assets of Enterprises Law is proposed to secure equal legal protections and opportunities for the private sector [para. 16][para. 17][para. 18][para. 19].

Finally, China plans to accelerate the development of a new energy system and integrate electricity generated from renewable sources into power grids. This supports China’s dual carbon goals to peak emissions by 2030 and achieve carbon neutrality by 2060. Experts anticipate imminent power market reforms to enhance efficiency and balance climate goals with energy security, including establishing a unified national power market system and promoting carbon emissions trading [para. 20][para. 21][para. 22][para. 23][para. 24][para. 25].