Will China’s plenum dazzle or disappoint?

What you can expect from China's third plenum

Expectations are high for far-reaching economic reforms at a key policy meeting of China's leaders this weekend. But so is the scope for disappointment, analysts say.

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China's president Xi Jinping has promised a comprehensive reform plan at a four-day plenum of the Communist Party that begins on Saturday, according to local media reports.

The meeting is significant because it will be the first real opportunity for Xi to outline his economic agenda one year after a once-in-a-decade leadership change in the world's second biggest economy took place.

Add to that the historic significance of the plenum – it has marked a turning point for major policy shifts in the past such as in 1978 when Communist Party leader Deng Xiaoping unveiled reforms that led to the opening up of the economy and paved the way for three decades of rapid economic development.

"I think the plenum could be far-reaching and I think it could be profound. But note that there is a three-to-five year time horizon attached to the bulk of these reforms," said John Woods, head of fixed income and senior portfolio manager at Citi Investment Management.

Analysts say a report released last week by China's Development Research Centre (DRC), a think-tank linked to the State Council – the equivalent of China's cabinet – provides some idea of the reforms that could be outlined at the plenum.

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The DRC recommended creating a national social security system and making changes to state-owned enterprises. It also recommended an equal valuation of urban and rural land, saying that the current structure had distorted prices.

According to Credit Suisse the changes proposed by the DRC report could "potentially be revolutionary."

Unprecedented change?

Expectations for sweeping change were also lifted last week when Yu Zhengsheng, China's fourth-ranked politician, promised "unprecedented" reforms at the plenum.

"We believe the reform framework proposal revealed by the Development Research Centre should be viewed as the foundation of Xi's framework of reforms," Robert Prior-Wandesforde, director for non-Japan Asia economics at Credit Suisse, said in a note.

"We have high hopes that Xi will deliver an ambitious reform guideline. To go from reform architecture to detailed policy design and execution, the ball will need to be moved to the bureaucrats' court. The success of the ambitious reform package would depend on details and execution, in our view," he added.

China's plenum could be 'profound:' Citi

China's economy has experienced double-digit growth rates over the past three decades, but in recent years policymakers have shown a tolerance of slower growth as the economy transitions away from investment and exports to one that is driven by consumer spending.

The government has a full-year growth target of 7.5 percent and a growth rate in line with that target would mark the slowest pace since the late 1990s.

Analysts say that to encourage the move towards a consumption-driven economy, China needs to shift more of its 1.4 billion population into cities and provide a social safety net that boosts consumers' confidence to spend.

According to some analysts, China's leaders could shy away from some areas where they are likely to face strong opposition such as reforming the state-owned enterprises.

Strategists say China urgently needs to address corruption and inefficiency at state-run businesses.

"Measures related to social stability, for instance a social security system and land reform will go through. But other measures such as reform of the state-owned enterprises and increasing competition could be slower," Stephen Sheung, head of investment strategy at SHK Private, a wealth management firm, told CNBC.

"They will probably maintain a pilot–scheme approach to reform and that could disappoint investors," he added.

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In September, China launched a free-trade zone in Shanghai to test economic reforms.

Analysts at Nomura added that on the subject of state-owned enterprises, the plenum could reiterate the need for efficiency or just ignore the issue.

"We expect the meeting to result in the release of a far-reaching reform plan on structural issues, but its effectiveness is uncertain as that depends on implementation," they said.

— By CNBC.com's Dhara Ranasinghe; Follow her on Twitter @DharaCNBC