Stephen Roach of Yale Suggests China’s Solutions to Challenges Might Be Exhausted

China did not convene its so-called “Third Plenum” meeting in the fall of 2023 and has not yet scheduled a date for the eagerly awaited plenary session. That is a “pretty big deal”, according to Stephen Roach, a senior fellow at Yale Law School — who says this may be a sign the country is struggling to find solutions to the challenges it is faced with.

Chinese President Xi Jinping has utilized the plenum gatherings to unveil a plethora of reforms to establish the tone for his leadership, and while not all of those policies have been executed, they conveyed a message about the country’s future, Roach conveyed to CNBC’s “Squawk Box Asia” on Monday.

“The failure to take advantage of that opportunity at a time like we have today in China, which is actually a much more serious set of challenges that China faces, I think, you know, indicates the fact that they may have run out of imaginative solutions to tough problems,” Roach said.

China Flag
China’s delayed Third Plenum raises economic uncertainty, signaling potential struggles in policy innovation.

China is grappling with an array of issues, not least economically. Defying expectations, the world’s second-largest economy has struggled to regain momentum following the coronavirus pandemic.

This encompasses the country’s real estate sector, which has been in disarray as construction projects remain unfinished and developers grapple to make ends meet. Recent data has hinted at an economic deceleration, which coupled with persistent deflation and a sluggish stock market has left many market participants pondering whether to invest in China’s economy.

Other challenges encompass China’s aging population and productivity, Roach pointed out.

“China’s got an aging society and it’s got productivity issues and it needs more productivity growth to offset the loss of workers and how are they going to do it?”

“Xi Jinping has been talking about you know new models and new sources of production, but we need to see something more specific, and the lack of a third plenum to give us that specificity I think is troublesome,” Roach remarked.

The Chinese Embassy in London did not immediately respond to CNBC’s request for comment.

What is China’s ‘Third Plenum’?

While Chinese authorities have announced some measures to bolster the country in recent months, including cuts to the benchmark five-year loan rate that mortgages are often pegged to, observers have said the measures are not far-reaching enough.

China’s “Third Plenum” meetings typically see senior party officials come together in the fall around a year after new leadership takes office, or current leaders are confirmed. A meeting would therefore have been expected to take place in the last quarter of 2023.

China's Great Hall of the People in Beijing.
Observers scrutinize Beijing’s political moves amid a sluggish economy, questioning priorities and future direction. (Credits: CNBC News)

Plenum meetings have been a hallmark of China’s political system, with seven of them usually taking place during the five-year term of the ruling Central Committee, which is elected by the National Congress. Each meeting tends to cover a specific theme, with the third one typically focusing heavily on economic issues.

Observers often take clues about the potential path ahead for the government and what its priorities are from the plenum meetings. At times, statements released following the plenum meetings have been deemed as too vague, with a lack of concrete action plans.

On other occasions, however, they have been viewed as economic turning points, with policies targeting growth and expansion setting the scene for years to come. This has raised questions about the delay of the 2023 plenum amid the sluggish state of China’s economy.

China’s annual parliamentary meetings, which cover topics such as government policy plans and targets and are known as the “Two Sessions,” begin this week. Investors are paying close attention to any signals about economic stimulus that may come out of the meetings.

In a move that broke with traditional Chinese political procedure, Beijing on Monday announced that Premier Li Qiang would not be giving a press conference at this year’s parliamentary meeting. They would also not happen during the remainder of the congressional term — which is set to last three more years.

Jackson Kelley
Jackson Kelley
Jackson is a political activist and market expert. He covers the impact of politics on the market and global economy.
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