One of the most significant recent events, worldwide, was the meeting of the Third Plenum of the 18th Congress of the Communist Party of China. A plenum involves the entire Central Committee of the Communist Party, which is composed of 205 full members and 167 alternate members. These are chosen at the First Plenum of a Congress. With each Congress having a life of five years, plenums usually happen every year. Above the Central Committee is the Politburo, which is composed of 25 members; within the Politburo there is an even smaller group, the Standing Committee, of seven people. At the top of the pyramid is the General Secretary of the Party and the Chairman of the Central Military Commission, both posts currently held by Xi Jinping, who also holds the top government job of President.

The Third Plenum ended with the announcement of a number of very important reforms, many of which will, if implemented, have a significant impact on the economy. Thus, the welfare system is being reformed in such a way as to make geographic mobility easier for workers. Under the country’s household registration system, people who migrated from their home areas to urban districts lost their right to public services. This will no longer be the case. This will allow a much freer movement of labour and stimulate urbanisation, although strict controls will still be applied to migration to the largest cities, notably Beijing, Guangzhou, Shanghai and Shenzhen.

All land in China is owned by the State, and farmers have the right only to work the soil on the land assigned to them. In the future, according to the official Xinhua News Agency, they will be able to “possess, use, benefit from and transfer their contracted land, as well as the right to use their land ownership as collateral or a guarantee”. This amounts to a huge change that will have profound economic consequences.

Major financial reforms were also announced. A deposit insurance scheme will be established next year. This, in turn, will allow qualified private investors to set up banks. Controls on bank lending rates have already been abolished. The Initial Public Offerings system will be reformed. Price controls on electricity, natural resources and water will be loosened.

China’s State-Owned Enterprises (SOEs) will also be reformed. There are currently 113 large SOEs owned by the central government (there are also provincial and even city-government-owned SOEs). They won’t be abolished, but will be opened up to private investors (although there will be a limit to the degree of privatisation that will be allowed). The SOEs will also have to pay 30% of their earnings to the State, which will, from 2020, use these monies to help fund social security. Reportedly, the central-government-owned SOEs currently pay 5% to 20% of their profits to the State.

However, the role of SOEs in the economy is set to decline. The Third Plenum made clear the Chinese leadership’s desire that the private sector play a bigger role in the economy. It affirmed that the market will play a “decisive” role in the allocation of resources and promised to protect private property rights.

Already, all SOEs together account for less than half of China’s industrial output. With a 46% share, this is still substantial and still dominant. But, in 1978, when then Chinese leader Deng Xiaoping launched the reform programme that has transformed China, 100% of industrial output was from State-owned plants. So there has already been a substantial shift to the private sector and it seems clear that the Communist Party leadership wants this shift to continue.

What all this means is that the Chinese economy is set to become more and more capitalist. This is a clear warning to those on the left of South African politics (and the left wing of the Tripartite Alliance, in particular) that the socialist economic policies they espouse are increasingly reactionary and anachronistic in the twenty-first century. They certainly won’t get any support from Beijing.

To change the topic: in my last column, I wrote about Brazil’s then upcoming auction of the Libra field in the country’s ‘pre-salt’ offshore oil fields. I noted that, although officials had expected 40 companies to submit bids, only 11 registered to do so, of which eight were State-owned. The rest had been put off by what they saw as excessively onerous conditions.

The actual auction took place after our deadline for that edition. And the result was even worse than feared. Of the 11 companies registered, no fewer than six dropped out and did not submit bids. The remaining five (CNOOC, Petrobras, PetroChina, Shell and Total) formed a single consortium. For the Libra field, Brazil got precisely one bid, which, unsurprisingly, was set at the lowest level. Officials proclaimed the auction a great success and, in a sense, they were right in that they did auction the field off. But there can be no doubt that the outcome was a bitter disappointment, compared with the original high hopes.

Interestingly, Shell and Total each have a 20% stake in the winning consortium, while the two Chinese SOEs, CNOOC and PetroChina, each hold 10%. Note also that five of the companies that dropped out were State-owned. State-owned companies may sometimes have less focus on rapidly achieving profits, but they can also be driven away by burdensome and profit-sapping requirements. Those in South Africa who believe that they can rely on SOEs from friendly countries to invest in this country, regardless of the conditions imposed, are dangerously naive and ill-informed.