Change in the Order of the Communiqué—Seven Signals from the Fourth Plenum

Change in the Order of the Communiqué—Seven Signals from the Fourth Plenum

From October 20 to 23, the Fourth Plenary Session of the 20th CPC Central Committee was held in Beijing, where the "Proposal of the CPC Central Committee on Formulating the 15th Five-Year Plan for National Economic and Social Development" was reviewed and adopted. From the contents of the communiqué, we believe there are seven signals to pay attention to:

1. Overall in line with market expectations

Regarding the macroeconomic situation, the communiqué pointed out: "During the '15th Five-Year Plan' period, our country's development environment is facing profound and complex changes, entering a period where strategic opportunities coexist with risks and challenges, and where unpredictable and uncertain factors are increasing." The Fourth Plenary Session continued the direction and tone of the Third Plenary Session of the 20th Central Committee, and the economic goal of "per capita GDP reaching the level of moderately developed countries" is consistent with the long-term goal for 2035. The meeting emphasized the transformation of technology into industry, promoting reform through opening up, ensuring and improving people's livelihood, national security, etc., and retained the arrangement from the Third Plenary Session to discuss short-term economic issues.

2. Industrial policy shifts from focusing on technological breakthroughs to emphasizing industrial implementation

Industrial policy has been moved from the second priority in the Fifth Plenary Session of the 19th Central Committee to the first priority this time, placed ahead of "accelerating high-level technological self-reliance," emphasizing "promoting the deep integration of scientific and industrial innovation." The focus of industrial upgrading has shifted from breaking through technological barriers to widely applying emerging technologies and forming large-scale industrial chains. Since the end of last year, Shanghai, Henan, Tianjin, Wuxi, Shenzhen, and Anhui have successively issued documents on enterprise mergers and reorganizations, with the main goal of supporting horizontal and vertical integration of industrial chains to better transform technological achievements into high added-value products. The "15th Five-Year Plan" is expected to continue in this direction by integrating resources to build stronger emerging industrial chains.

3. The importance of opening up has increased

High-level opening-up has moved up the priority list from the ninth position in the Fifth Plenary Session of the 19th Central Committee to the fifth position, the largest upgrade among all directions. We understand that the current rise in priority for opening-up is, firstly, in response to the trade frictions initiated by the United States, emphasizing "sharing opportunities and developing together" with countries around the world, and strengthening cooperation with non-U.S. countries, which is a continuation of the countermeasures applied during the reciprocal tariffs in early April. Secondly, it stresses "promoting reform by opening up," consistent with the tone of the Third Plenary Session, pushing domestic reform and innovation by introducing overseas supply.

4. The priority of people's livelihood policy has risen

The priority of people's livelihood policy has moved up from tenth in the Fifth Plenary Session of the 19th Central Committee to ninth, corresponding with expanding domestic demand by "adhering to benefiting people's livelihood and promoting consumption, combining investment in goods and people closely." This meeting mainly emphasized "smooth channels for social mobility" and "improving the income distribution system," consistent with the Third Plenary Session. The focus is on, firstly, weakening the household registration system and breaking the institutional barriers to free labor mobility, and secondly, increasing the share of labor in distribution, fundamentally expanding residents' consumption.

5. Reform focuses on "unified national market" and "marketization of production factors"

Regarding reform, the meeting emphasized "resolutely breaking bottlenecks that hinder the construction of a unified national market" and "accelerating the improvement of systems and mechanisms for market-based allocation of production factors." Although "anti-involution" was not directly mentioned, the construction of a "unified national market" and "factor marketization" itself includes anti-involution requirements such as fair competition, market-based pricing, and the reduction of disorderly race-to-the-bottom competition. It is suggested to pay attention to whether the subsequent recommendations of the CPC Central Committee for the "15th Five-Year Plan" will specifically mention "anti-involution."

6. Greater emphasis on national security

Against the backdrop of unprecedented changes unseen in a century, the meeting put greater emphasis on security issues. "Security" was mentioned 15 times in the communiqué, in line with the policy focus of the 20th Party Congress. First, the safety of the industrial chain was stressed, mentioning "maintaining a reasonable proportion of manufacturing," continuing the "Fourteenth Five-Year Plan" proposal of "keeping the share of manufacturing basically stable." In the future, maintaining the advantage of a complete domestic industrial system remains necessary. Second, technological security was emphasized, highlighting "strengthening original innovation and tackling key core technologies." Support for "bottleneck" technologies and domestic substitution is expected to increase further.

7. No mention of fiscal and tax system reform

Unlike the explicit mention of "establishing a modern fiscal, tax, and financial system" in the Fifth Plenary Session of the 19th Central Committee, this meeting did not mention fiscal and tax system reform, which is below previous market expectations. This indicates that the pace of advancing fiscal and tax reform may be relatively prudent. However, the meeting did mention "improving the macroeconomic governance system," and fiscal and tax system reform is a part of the "macroeconomic governance system," so further arrangements remain to be clarified.

Authors: Zhang Wei, Ren Siyu. Source: Caitong Securities. Original title: "The Order Changes in the Communiqué—Seven Signals from the Fourth Plenary Session"

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