China's reform plan guidebooks: Real estate; Population development; Implementation of reforms

The drafting team comprises nearly 80 people, including members of the Standing Committee of the Political Bureau of the CPC Central Committee, as well as other senior officials and experts.

Good evening. It has been more than 20 days since the resolution adopted at the third plenary session of the 20th Central Committee of the Communist Party of China (CPC) was made public. Various interpretations have emerged both domestically and internationally. The Chinese government has also been steadily rolling out specific policies in alignment with the resolution's spirit. The ones that immediately come to my mind include a State Council's guideline on advance high-quality development of service consumption (关于促进服务消费高质量发展的意见) and a plan to advance people-centered new-type urbanization (深入实施以人为本的新型城镇化战略五年行动计划）.

Analyzing each of these policies requires considerable time, so I will be spending more time on analyzing the resolution this month. For China observers wondering why the Chinese government doesn't provide massive direct subsidies to citizens to stimulate consumption, a recent article by Nomura’s chief China economist Lu Ting is worth reading. Fred Gao has provided a timely translation of Lu Ting's insights.

Lu Ting Argues Against Broad-Based Direct Subsidies for Resident

I believe an important source of information that should not be overlooked is the two official guidebooks published last month to help people better understand the resolution -- Tutorial on the Resolution of the third plenary session of the 20th CPC Central Committee ( 《<中共中央关于进一步全面深化改革、推进中国式现代化的决定>辅导读本》) and Q&A Guidebook on the Resolution of the third plenary session of the 20th CPC Central Committee (《党的二十届三中全会<决定>学习辅导百问》) . According to the introduction of the two books, the drafting team comprises nearly 80 people, including Xi Jinping, three other members of the Standing Committee of Political Bureau of CPC Central Committee, as well as other senior officials and experts.

Both tutorials feature the full-text explanation of the resolution by Xi and 14 other important articles written by high-ranking Chinese officials such as Vice Premier He Lifeng and Foreign Minister Wang Yi, with each article focusing on a specific subject such as "new quality productive forces" and "fostering a favorable external environment."

In addition, a glossary is attached to the appendix of both tutorials, providing definition and explanation on terms such as debut economy (首发经济), silver economy (银发经济), etc. Zheng Xin and Rong Jiaojiao from Xinhua have written an Explainer introducing the appendix.

While both of the books serve as tutorial readings, there are some differences. Apart from the above-mentioned articles and glossary, the Tutorial on the Resolution consists of 30 more explanatory reports on specific reform tasks by senior officials and experts including Cai Fang, chief expert of the National Think Tank under the Chinese Academy of Social Sciences, Tang Fangyu, deputy head of the CPC Central Committee Policy Research Office, etc. The Q&A Guidebook on the Resolution contains 112 Q&As that thoroughly scrutinized all the possible questions around the Resolution and provided clear answers to all of them.

In most cases, immediately after the Party's major events such as a key plenum of the CPC Central Committee or the Party’s National Congress, such tutorials will be published, as it is usually put, to help people learn and implement the guiding principles of the certain event.

For example, two guidebooks came out right after the Party’s 20th National Congress in 2022, and I have wrote several newsletters elaborating on them, such as: What will be China's priority in pursuing high-quality development over the next five years, and How will China fulfill the goals for the centenary of the People’s Liberation Army in 2027?.

Typically, major Chinese media platforms like People's Daily publish articles from the tutorial readings after their official release. Starting from July 27, People's Daily has been featuring these articles on its Page 6, releasing one article per day in the order listed in the catalog.

For instance, the piece on Aug. 8 was the 13th article: Implementing the overall national security concept and solidly promoting the modernization of the national security system and capabilities (推进国家安全体系和能力现代化) by Minister of Public Security Wang Xiaohong. Manoj Kewalramani introduced and interpreted this article in a newsletter of his Tracking People's Daily.

Chen Wenqing on the Third Plenum & Building Socialist Rule of Law System

In today’s newsletter, I will lead you through three carefully picked articles from the tutorial readings, two from the Tutorial, and one from the Q&A Guidebook. The three articles I selected focus on three key themes: real estate, population development, and implementation of the reforms. These reflect the major short-term challenges facing China's economy, the significant issues impacting long-term development, and how China ensures the effective implementation of its reform policies—topics that I’ve observed are of particular interest and discussion among overseas China watchers.

To avoid lengthiness, I only selected 2-3 highly relevant paragraphs from each article, and provided interpretation and some notes on them.

In case you didn’t notice, I also wrote a piece of my Ten quick takeaways of the Resolution of the Central Committee of the CPC on Further Deepening Reform Comprehensively to Advance Chinese Modernization. And I believe A practical guide to the 3rd Plenum’s Decision by Robert Wu is also worthy reading.

A practical guide to the 3rd Plenum’s Decision

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1. Real estate sector

Subject: What does "foster a new development model for the real estate sector" mean? 如何理解加快构建房地产发展新模式

Source: The Q&A Guidebook (Page 176-178)

转变运营方式。改革房地产开发融资方式和商品房预售制度，有力有序推行商品房现房销售，加强预售资金监管、严格预售门槛。引导房地产企业逐步形成适度杠杆比例、合理负债水平和正常周转速度的发展机制。

Change the operation pattern. Reforms will be carried out to change the way real estate development is financed and to improve the advance purchase system for commodity housing. Existing home sales in commodity housing will be promoted vigorously in a orderly manner, and supervision and control of pre-sale funds will be strengthened with strict pre-sale threshold. It is important to guide real estate enterprises to gradually form a development mechanism with a moderate leverage ratio, reasonable liabilities level and sound capital turnover rate.

Li Daokui, Professor and Director of the Academy of Chinese Economic Thought and Practice (ACCEPT) at Tsinghua University, praised the real estate sector reform as one of the three key highlights of the resolution in his recent interview with China Daily.

When China's real estate market was fast developing, the pre-sale system played an important role in the early stage. However, due to the lack of strict supervision of pre-sale funds for commercial housing in some regions, home buyers bear a high risk of delayed delivery of houses. Policymakers must have also seen the impact of unfinished buildings under the pre-sale system on home buyers, as well as the numerous customer complaints about the quality of new houses in the past two years.

Observers say that a possible financing model, in future, is to rely on the real estate developers' own funds in the land acquisition stage, rely on development loans in the development stage, and rely on home buyers' own funds and personal loans in the sales process, thus returning to a simple and standardized financing system.

完善调控政策。完善城市规划、建设、治理体制机制。充分赋予各城市政府房地产市场调控自主权，因城施策，允许有关城市取消或调减住房限购政策、取消普通住宅和非普通住宅标准。

Improve the regulatory policies. Mechanisms related to urban panning, construction and governance will be further improved. Municipal governments will be given greater decision-making powers to regulate the real estate market, and based on local conditions, some cities will be permitted to abolish or reduce restrictions on housing purchases and to scrap relevant standards for ordinary and non-ordinary homes.

Since the beginning of 2024, most provinces and cities across the country have successively cancelled the housing purchase restriction policies that had been implemented for many years. According to statistics published by China Real Estate Business (CREB), as of July 2024, only Beijing, Shanghai, Guangzhou, Shenzhen, Tianjin and Hainan are still implementing the purchase restriction policy. Considering that China's real estate market is unlikely to return to its previous state, city-specific policies is very likely to be the long-term strategy in future.

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2. Population development

Subject: Improving the systems for supporting population development and providing related services 健全人口发展支持和服务体系

Author: 蔡昉 Cai Fang, chief expert of the National Think Tank under the Chinese Academy of Social Sciences.

Source: Tutorial on the Resolution (Page 314-321)

第七次全国人口普查显示，2020年我国总和生育率降至1.3……根据人口统计规律，总和生育率为 2.1，是一个保证人口发展可持续的更替水平生育率。从世界各国先例来看，生育率在较低的水平上长期徘徊之后，通常难以再回升到更替水平。不过，促进总和生育率向这个方向尽可能靠近，或者在目前水平上有明显的提高，应该成为政策努力达到的目标，以此保持我国人口资源环境关系更加协调，超大规模市场优势更加巩固，综合国力进一步稳步提升。

China's total fertility rate fell to 1.3 in 2020, according to its seventh national population census. Demographically, a total fertility rate of 2.1 children per woman represents the replacement level that ensures a stable population. As evidenced by precedents across the world, it is difficult for a long-term low fertility rate to recover to the replacement level. Nonetheless, fertility policies that aim for the replacement level or significant improvement are necessary so as to further synergize China’s population, resources and environment, consolidate its advantage as a mega market and steadily enhance its national strength.

It is difficult for China to return to the replacement level of 2.1, a fact acknowledged by experts on Chinese demography, but it also remains by no means easy to get close to or significantly improve on the current level. Nevertheless, demographic structure could prove a hindrance to China's super-large-scale market advantages and comprehensive national strength, so in the foreseeable future, we will definitely see China take a series of measures to deal with this problem.

在特殊性方面，既包括诸如“未富先老”带来的诸多挑战，也包括超大规模老年人口具有的人力资源优势和巨大市场潜力。

In terms of uniqueness of China's population structure, it includes not only the many challenges brought about by “aging before getting rich,” but also the advantages of a large elderly population as a human resource and the vast market potential it represents.

At the 84th CMF Macroeconomic Hot Issues Seminar in April, Dr. Cai said that aging before getting rich leads to an imbalance between the age structure and the capacity and willingness to consume.

China's aging rate (i.e. the proportion of people over 65 years old) is at least 5 percentage points higher than the world average; at the same time, China's resident consumption rate (i.e. the proportion of resident consumption expenditure in GDP) is 18 percentage points lower than the world average. While China's per capita GDP is already higher than the world average, the resident consumption capacity has failed to catch up with the world average. Therefore, it is necessary not only to increase per capita GDP and per capita disposable income, but also to make structural adjustments.

2023年我国老年人口抚养比达到22.5%，比十年前提高了9.4个百分点，这既导致劳动力供给减少，也造成养老金持续发放的压力。应该看到，部分已达到退休年龄的人口既有继续工作的体能体魄，也有延迟退休的愿望。按照自愿、弹性原则，稳妥有序推进渐进式延迟法定退休年龄改革，有助于更充分挖掘大龄劳动者的人力资本和劳动力潜力，同时提高养老金发放的长期可持续性。

The dependency ratio of China's elderly population reached 22.5% in 2023, an increase of 9.4 percentage points over a decade ago. This has led to a decrease in labor supply and put more pressure on the continued pension payments. It is important to recognize that some individuals who have reached retirement age still have the physical capability and the desire to continue working. In line with the principle of voluntary participation with appropriate flexibility, China will advance reform to gradually raise the statutory retirement age in a prudent and orderly manner. It can help further tap the human capital and labor force potential of senior citizens, and facilitate the sustainability of pension systems in the long run.

Compared with worldwide levels, China's retirement age is almost at the lowest end, but raising retirement age is closely related to everyone's life and has a long-term impact, which is why it has become a hot topic online after the third plenary session was concluded. According to a recent report, a former official of the Ministry of Human Resources and Social Security revealed to Caixin that a plan had already been formulated for delayed retirement, which was more moderate than the current public routine, but considering social resistance and the lack of conditions, it was not announced to the public.

Regarding raising the statutory retirement age, I interviewed Yin Xiwen, a researcher from the Tian He Institute of Labor Relations at Jilin University. Below is Yin's response:

"I would like to emphasize one point first. There is a noticeable social stratification in China today, and public opinion on delayed retirement varies across different social strata. For instance, in rural areas, there is no strict retirement age from the perspective of production, and the same applies to migrant workers. In fact, some major cities even impose age restrictions on older migrant workers for safety reasons. Therefore, it’s not that these groups don’t have a need for retirement, but rather that they don’t feel the impact of delayed retirement as strongly due to the necessity of continuing to work.

The group most affected by delayed retirement is the urban middle class. As the main workforce in cities, they generally have better retirement benefits, but they also face significant pressure to support the elderly. Among this group, opinions on delayed retirement vary depending on their age. Under the current pension system, delaying retirement indeed extends their working years, but it also reduces the pension burden on the younger generation. If we maintain the current uniform retirement age, ensuring the proper disbursement of pensions would require increasing the pension contributions from younger people, which would likely lead to greater dissatisfaction among them.

Therefore, I believe that gradually implementing a flexible, voluntary approach to raising the statutory retirement age is a reasonable decision. It balances the interests of all parties within the constraints of China’s current demographic structure and social diversity."

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3. Implementation of reforms

Subject: Ensuring the implementation of reforms with relentless perseverance 以钉钉子精神抓好改革落实

Author: 唐方裕 Tang Fangyu, deputy head of the CPC Central Committee Policy Research Office. (Tang attended a press conference on the guiding principles from the third plenary session in July. )

Source: Tutorial on the Resolution (Page 367-374)

为什么我们经常强调“一分部署、九分落实”呢？其根本道理在于，抓落实作为作决策的后续工作，所花费的时间和精力、所需要的资源和条件、所涉及的战线和领域、所直面的矛盾和问题，多数情况下比作决策更多一些。同时，再好的决策，如果执行不力、抓落实不到位，就见不到成效，或者达不到预定目标。

Why did we repeatedly emphasize that, "to achieve any task, its plan accounts for only 10%, whereas its implementation 90%"? This is because implementation, in most cases, could be more time-consuming and strenuous, and confronted with more problems than decision-making, as it requires more resources and involves more fronts and fields. Meanwhile, without effective and thorough implementation, decisions, no matter how wise it is, can deliver no tangible result or lead to any goals.

“一分部署、九分落实 to achieve any task, its plan accounts for only 10%, whereas its implementation 90%" clearly shows that the top leadership's strong emphasis on the importance of the implementation of the reforms. While it's true that further deepening of reforms presents many difficulties and challenges, it would be unfair to suggest that the decision-makers do not fully recognize the significance of the implementation.

在时间表上，应当按照到2029年新中国成立80周年完成本轮改革任务的总要求，根据轻重缓急确定各项改革任务的起止时限，一个节点一个节点推进，跑表计时，到点验收。在优先序上，是先易后难、循序渐进，还是抓大带小、纲举目张，应当依具体情况而定，不必强求一律。根据需要，可以优先从最急迫的事项改起，从老百姓最期盼的领域改起，从社会各界最能够达成共识的环节改起；也可以集中优势兵力，优先落实牵一发而动全身、落一子而满盘活的重要改革举措。

According to the blueprint, the reform tasks laid out in the resolution shall be completed by the time the People’s Republic of China celebrates its 80th founding anniversary in 2029. Specific time limit and deadlines should be set for each reform task based on its significance, urgency and impact. Every node along the timeline should be supervised and have its expected results checked on time. Priority should be determined on a case-by-case basis as needed. The reform could start with the tasks with the most urgency and of the greatest concern to the people, or tasks that are highly probable to reach public consensus. The reform could also prioritize those tasks with huge and extensive impact through concentrated strengths.

In addition to clearly setting the overall reform goals to be achieved by 2029, there is significant flexibility in the sequence of reforms, avoiding a "one-size-fits-all" approach. Instead, the emphasis is on analyzing each situation individually, embodying the "seeking truth from facts" spirit that is central to the reform and opening-up policy. This sends a positive signal to the departments responsible for policy implementation.

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