Chinese Communist Party meeting puts Xi in the spotlight

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It is a hotel in name alone. The Jingxi Hotel in Beijing – the venue where Communist Party leaders have long thrashed out their biggest and most far-reaching decisions – is heavily guarded, closed to foreigners and managed by the General Staff Headquarters of the People's Liberation Army. Those meetings are shrouded in secrecy, but if history is a guide, it is here that President Xi Jinping and several hundred of China's most powerful figures will gather this weekend to address the economic imbalances and social unrest that loom over the country.

Their task is nothing short of proving to their own people – and the world – that they have sufficient will and skill to remake the world's second-largest economy.

This, more than any moment since he became president in March, is Mr. Xi's opportunity to show in what direction he intends to take a country whose increasingly central global role has been overshadowed by mounting problems. He has acknowledged as much, saying a "master plan" toward a "profound revolution" is being drafted.

China's economy is slowing. It is struggling to modernize and urbanize without fouled air and food killing its people. Explosions in two cities recently underscored broad social tensions.

The four-day plenum, which begins Saturday, may well be the most important since the meeting in 1978 that saw China embark on the decades of opening up that have made it a rising superpower. Get it right, and the country lumbers toward a place that better meets the needs of its people – and, by extension, the rest of the world with its dependence on their labour and buying power. Get it wrong, and face the risk of new threats to the one-party state, whose success in this non-democratic system is defined almost purely by its performance. "I believe this plenum might be the last chance to rescue the Communist Party of China," says Zhang Lifan, a respected scholar and historian of the party.

What is the significance of this 'Third Plenary Session' of the current Central Committee?

In the Chinese system of five-year plans, the third plenum is the middle and, particularly to the outside world, the big one: It's here that leaders tend to tackle the economy. That, of course, is a loose definition. All sorts of things fall under that umbrella – including potentially, this year, some steps toward changing the way government works. In a country where state and shopping mall are so closely intertwined, it's not a stretch to consider that economic reform. But what actually happens behind the closed doors? Scant few know. It's a gathering of 376 Communist Party leaders. There will be meetings, speeches, even votes. Most decisions are preordained, and recent months have seen a purge, under the auspices of a war on corruption, that has ejected some rival factions. But those attending are still among China's most powerful people, and "it's possible for arguments to break out, despite their efforts to avoid such a possibility by all means," says Mr. Zhang, who until 2000 worked at the Chinese Academy of Social Sciences but has since severed ties with Official China and become an influential critic.

What is expected to happen?

Mr. Xi has a chance to give the world a glimpse of how he intends to make real his vision for the country by presenting a road map that stands to have more sway than mere speeches.

"This Third Plenum will be a critical trial balloon that ultimately determines the ability of the current leadership to make its mark or get pushed back into a caretaker role," says John Gruetzner, a Beijing-based consultant and long-time China observer.

Reforms, if announced, could take all sorts of shapes. One intriguing possibility: give courts greater independence, opening the way to class-action lawsuits that might make the current system more accountable. New taxes, such as property taxes, could be another way of reshaping governance.

Another is reform of hukou, the system of household registration by geography that is a defining feature of the country, and is one of its most controversial. Those registered in rural areas receive few benefits, even if they move to cities where they remain second-class citizens. It's not a small problem, with roughly a quarter-billion migrant workers now caught in the urban hukou trap. Change could be transformational, since in today's Chinese cities, those migrant workers have far higher rates of savings (making them less energetic consumers), lower rates of home ownership and lower wages than permanent residents.

More important still may be some sign of change in a country where the government's hand is pervasive. The biggest concern is whether the government is able to take a step back and allow market forces to take the lead in directing the economy, says Alaistair Chan, an economist with Moody's Analytics.

Will there be a shift in economic policy?

In October, the Fitch ratings agency put out a warning: China's growth model, it said, is "unsustainable." Investment levels have grown to such huge numbers in China that they could soon eclipse savings, "and China would become a trade deficit country, dependent on capital inflows to fund growth." Debt is high. And the economy continues to be driven by the vast sums poured into investment – splurges on sprawling highways, bridges and factories. Consumer spending remains a smaller factor. At the same time, huge sectors of the economy remain controlled by state-owned enterprises, many of them behemoths that are heavy on waste and short on competitiveness.

Mr. Xi has given a few hints of his intentions. This year, he embarked on what was called an "inspection tour" to companies making touchscreen panels and energy measurement equipment. He spoke about the need to pivot from heavy industry, long a foundational element of Chinese growth but now over-supplied, to a more innovative and research-based economy. He also met with local officials and stressed the need to move away from a long-held system that has defined performance by a single number: the GDP. Premier Li Keqiang, meanwhile, dropped in to several rural areas amid discussion of land reform that could help modernize the country's rural agricultural sector

What is not to be expected?

A sexy title, for one. Last year, delegates came together to produce a "Decision on Some Important Questions in Promoting the Development of Rural Reform." Plenary sessions tend to produce documents heavy on ideas and light on details. They are meant to be guiding policies, sometimes easily summed in a quick catchphrase. Details can trickle out later, in smaller shifts that, in time, reverberate into something larger. Attacking corruption or requiring more efficient corporate conduct, for example, might effectively prod corpulent state-owned enterprises into acting more like the private sector, a kind of backhanded tactic for achieving that goal.

This interview has been edited and condensed.