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Party summit in China delayed by economic woes

Annual Central Committee meeting that will set longer term economic polices pushed back to December

Party summit in China delayed by economic woes

(L-R) Chairman of the National Committee of the Chinese People's Political Consultative Conference (CPPCC) Wang Yang, Secretary of the Central Commission for Discipline Inspection (CCDI) Zhao Leji, China's Vice President Wang Qishan, former vice premier Ma Kai and Liu Yandong applaud during the closing session of the National People's Congress (NPC), China's legislature, in Beijing's Great Hall of the People in this March 20 file photo. (Photo by Greg Baker/AFP) 

In a highly unusual move, the annual meeting of the Central Committee of the ruling Chinese Communist Party (CCP) has been delayed until probably December, which would mark the 40th anniversary of Deng Xiaoping's reform and opening up policies.

Most observers see this as a sign of divisions within the party over how to move forward as the economy continues to slow due to structural problems and de-leveraging, or the process of trying to remove excessive debt.

This is being exacerbated by the escalating trade war with the U.S. instigated by President Donald Trump.

Economic slowdowns, by their nature, tend to hit the poorest the hardest. And China is not exempt despite it ranking as the world's second-largest economy after an extraordinary run of 30 years of sustained growth.

Yet China is still a developing country with a per capita income equivalent to just a fraction of countries. Moreover, its market reforms are incomplete.

There were 55 million poor Chinese living in rural parts of the country in 2015, according to the World Bank. The global agency based this figure on the country's poverty standard, which yielded a per capita net income of 2,300 yuan (US$331) in rural areas in 2010.

Some 500 million people, or roughly 40 percent of the registered population, subsist on just $5.50 per day.

The meeting of the CCP's top 400 or so cadres, also known as a plenum, usually takes place in October, which also happens to be the nicest month of the year, weather-wise, in Beijing.

The meeting is held in the Great Hall of the People, a Stalinist edifice that faces Tiananmen Square and sits across from the ancient home of Chinese emperors, the Forbidden City.

Last year, the five-year event was held in mid-October to confirm the shape of the nation's top political body, the Politburo Standing Committee (PBSC) of the Communist Party.

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This saw five members retired and five new faces join President Xi Jinping, who heads the party, and Premier Li Keqiang in an all-male group chosen from the 25-member Politburo that sits atop the Central Committee.

Vice-President Wang Qishan, Xi's chief lieutenant, still ranks as an unofficial member of the PBSC despite having had to officially "retire" at last year's plenum because he reached the prescribed age limit. He turned 70 in July 2018.

The plenum is often announced publicly with just a few weeks' notice, but last year's edition was heralded two months ahead of time.

There has been no mention yet of this year's meeting but it is always held before the start of January.

It is at this meeting that major reform programs are unveiled. Indeed, it was at the corresponding plenum in December 1978 that Deng would reveal his reform and opening up programs, which would drag China into the modern world and begin reshaping the global power map.

Importantly, the reforms kick started a process that has seen hundred of millions of Chinese raise their standard of living.

Yet the job remains incomplete, and the shift from a top-down command and control economy to a market-oriented one, which the Chinese describe as "socialism with Chinese characteristics," is stuck in a halfway house.

Here, large state-owned enterprises dominate various sectors, especially power, finance, mining, defense and other areas seen as critical to national security in the authoritarian state

The telecommunications sector is also tightly controlled, and while foreign investors are allowed minor stakes in the three major listed mobile and telecom groups, Beijing still calls the shots and reaps the financial reserves.

China is now facing a range of problems.

The major issue is its ever-rising level of debt, which many economists see as dangerously excessive at both the state and corporate level.

Bad debt rates are rising and an increasing number of companies are failing, leading to higher unemployment and more labor disputes, which spooks or stokes the fears of the country's huge security apparatus.

Indeed, part of the conundrum for China is as it tries to lower its debt is that this process often tends to crimp growth. At the same time, the government has continued its targeted stimulus efforts. But as the debt rises, the net effect of such measures becomes weaker.

In response, Chinese stock markets are having a shocking year, hitting middle-class investors hard. The graying population helps ameliorate unemployment but adds a growing burden to the nation's already struggling and under-funded health care and social welfare systems.

These are issues that are most likely being thrashed out behind closed doors right now. This is how the party operates, so that by the time the plenum comes around it can speak with one voice.

It also illustrates how Xi's position as the most powerful Chinese leader since Deng or Mao Zedong is far more tenuous that it may have been only a year ago.

Also weighing on the minds of party leaders is the fact that a laundry list of economic reforms was announced five years ago but many have not been broached, with others only partially completed.

On top of this is the ongoing trade war with the Unites States. This has seen tariffs added to products worth tens of billions of US dollars, triggering an equal response from China.

So while the party's annual plenum is likely to be delayed, the decisions made there will set China's economic course in the medium term and almost certainly affect the lives of most working-and middle-class Chinese.

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