The long-term outlook for Australia and Australian markets may be decided not in New York but in Beijing at a meeting known as the 18th Party Congress’ Third Plenum. It starts next Saturday, November 9.
China’s party chief and state president, Xi Jinping, who has convened the Third Plenum, wants the 2013 Third Plenum to be a landmark event, which undertakes enormous reform in China.
But the Xi Jinping reforms are being opposed by a large number of Chinese officials, who are the main beneficiaries from the current course of China’s development. At least in the West no one knows who has the numbers.
Share markets are very calm although the copper market is showing apprehension. China is the world’s biggest copper user and prices fell last night partly because of concern for the Chinese housing market.
An editorial published by China Securities Journal said China’s real-estate bubble poses a “danger” to the economy and called for property controls and reform of land and tax policies.
The China Securities Journal has clearly been talking with people in the Xi Jinping camp.
But it is the current system of property development, corruption and credit availability that is behind so much of the wealth generated in China. It represents a big part of the demand for Australian resources. Those advocating keeping the current systems point out that abandoning them would cause a rise in unemployment and social unrest.
To break down the opposition Alan Kohler sets out a possible strategy for the Xi Jinping camp (China's 'wall of money', October 21).
China’s national savings are $4.2 trillion, 50 per cent more than America’s. The wealthy Chinese politicians and members of the Communist Party – the so-called ‘elites’ – who own most of that money have been far keener to invest abroad than they have so far been allowed to do.
Many in the Xi Jinping camp believe that if the elites are allowed to invest overseas more easily, and educate their children overseas more liberally, then they will be more willing to allow their power bases at home to diminish.
And so expectations are growing that President Xi Jinping will announce the opening up of China’s capital account, allowing easier investment abroad by China’s wealthy, but at the same time reveal a building crackdown at home as part of a shift towards greater domestic consumption by Chinese consumers. Such a strategy would make it much easier for Chinese to invest in Australia but it will curb the China property and infrastructure investment that has fuelled our resource boom. Contrary to that sentiment, Chinalco told the Melbourne Mining Club meeting in China that the resources boom had a long way to run.
This speculation about the various forces is inclined to underplay the importance of the event.
The China Digital Times reminds readers that two years after the death of Mao Zedong, this five-day Communist Party gathering in December 1978 utterly changed China. It put the thrice-purged Deng Xiaoping at the helm, raised the importance of livelihoods above class struggle, loosened state controls and led to the opening of China to foreign trade and investment.
It took time but the 1978 Third Plenum also changed Australia. In 1978 it took a long time for the world to understand what had been decided. In 2013 the news may spread faster but it will still take time.