Great hopes for 'revolution' road map from Chinese leaders

The title may be dour, and the proclamations which emerge may prove dense and drenched in indecipherable party-speak. Yet the Third Plenary Session of the 18th Central Committee of the Communist Party of China, which kicks off this weekend, is shaping up as a key test of President Xi Jinping's credibility.

Expectations are high that this conclave of China's top leaders - the third such gathering since Xi took centre stage - will produce a new wave of much-needed social and economic reforms.

Rather than ordering cold showers all round, China's top leaders have merrily fanned the hype. The Communist Party's No. 4, Yu Zhengsheng, says the impact of the meeting will be "unprecedented". Premier Li Keqiang has hinted at deep and wide-ranging financial reforms at every public engagement prefacing the meeting.

And Xi Jinping himself has promised a "profound revolution" and is understood to have been dropping hints to foreign leaders that the coming session will be the most important in 35 years.

That reference is to 1978, where two years after the death of Mao Zedong, the thrice-purged Deng Xiaoping sealed his authority over the party, allowing him to shepherd through his vision of "reform and opening up". The loosening of state controls and the opening to foreign trade and investment has utterly transformed China, and much of the rest of the world.

As the "princeling" son of a revolutionary hero, Xi Jinping is already cutting a relaxed and confident figure as leader. The vanquishing of political rival Bo Xilai has also been seen as a key step in consolidating his authority.

But many remain sceptical of just how much power he holds, particularly with party elders like Jiang Zemin still influential in the background.

Below him, Xi is faced with entrenched vested interests who have been enriched by the party machine and stand to gain by maintaining the status quo.

"Deng Xiaoping was surrounded by people who were true believers," says David Kelly, a principal at research firm China Policy. "Now the leadership is surrounded by party officials who in actual fact command assets that make them millionaires."

If Deng's reforms made him a visionary, Xi is now compelled to act after a decade of hesitant leadership with Hu Jintao looking over his shoulder. While it was on Hu's watch that China's economy surged to the second-largest in the world, he failed to make tough calls necessary to make the growth sustainable, and to arrest worsening social and environmental problems.

China's economic growth is slowing. It no longer has boundless supplies of cheap labour. Its workforce is shrinking, the result of a rapidly ageing population due to longer life expectancies and a rigid one-child policy. Monopolistic state-owned enterprises prevent free-market competition and tie up money.

And while Australian iron ore exports remain more than healthy, demand depends on a Chinese economy increasingly reliant on investment spending and unsustainable credit growth.

Those optimistic about the plenum point to the assembly of a reform-minded team around Xi. The central bank governor, Zhou Xiaochuan, was asked to delay his retirement and is tipped to oversee the gradual liberalisation of interest rates and exchange rates. Lou Jiwei, the former head of China's sovereign wealth fund, is now finance minister.

The man appointed to draw the reform road map together, Liu He, is a highly rated technocrat who used to work for the Development Research Centre, a think tank that operates under the auspices of China's cabinet, the State Council.

The DRC has helped fuel much of the optimism by releasing a comprehensive reform proposal for the plenum, advocating a shake-up of state-owned monopolies and the financial system that underpins them. Farmers should be given the right to sell their land, it says, and rural migrants should be treated as equal to those born in the cities.

Those who believe the proposal is an accurate depiction of the leadership's intentions think the plenum will be nothing short of a policy revolution.

It is "probably the most ambitious top-down economic reform initiative in the history of the People's Republic of China," said Dong Tao, an economist with Credit Suisse. But while at the same time angling for a more open economy, Xi has spent much of his first year in power pursuing ideological campaigns that hark back to the era of Mao Zedong, while also tightening censorship of the internet and cracking down on any hint of liberal political thought.

Liberal economist Mao Yushi says either Xi hasn't made his mind up which direction to take the country in - or he simply doesn't have the power.

"Xi is trying to consolidate his power through Mao regardless of whether he believes in it or not. This is a mistaken mindset," says Mao Yushi. "The next step of reform is about equality and freedom, and eliminating privilege."

Many who believe the best is yet to come from China's economic growth point to the fact much of the country has yet to be urbanised. But while good for GDP, urbanisation comes at a social cost. Local party bosses have relied on requisitioning farmers' land and selling it to developers, not just to boost their tax take, but often to line their own pockets.

The government announced in January last year that the urban population for the first time exceeded its rural population, having reached 51 per cent (up from 18 per cent in 1978). But as The Economist points out, this is misleading.

About 270 million, or 40 per cent, of those included in the urban population may reside in cities, but they are forced to retain their rural hukou, or household registration, which shuts them out of property markets and social welfare, including access to healthcare and education.

Migrant workers are invariably treated as second-class citizens, restricted to the lowest-paid and least-safe jobs, and with very poor prospects for their children.

Giving rural migrants a leg-up in the cities will require a much costlier social safety net, and city-dwellers will have to share their already-strained hospital and school infrastructures with newcomers.

"It will be one of the most difficult reforms ever," Hu Xingdou, a hukou expert at Beijing Institute of Technology, said.

"But as China's economy enters a dead-end, social discontent and confrontations are getting more and more intense. This is the result of no reform."

Xi's time in power has coincided with discontent among the Chinese masses increasing to worrying levels for the government.

The yawning gap between rich and poor has long been made all the more infuriating by rampant corruption.

Add to that more recent and acute worries affecting the most basic needs - the soaring cost of living, housing affordability, food safety scandals, air pollution and environmental scares - and many are left wondering what the Chinese dream Xi promises actually represents.