A peaceful stretch of beach at Beidaihe, north of Chinas Hebei province. Photo: AFP

On an exclusive stretch of Beidaihe beach, China’s political elite will gather for their annual summer break next month at Chairman Mao Zedong’s favorite resort.

Nearly 260 kilometers, or 161 miles, from the hustle and bustle of Beijing, President Xi Jinping and Premier Li Keqiang will stretch out on sun loungers, before taking the occasional dip in the Bahai Sea, away from the prying eyes of traditional holidaymakers at the coastal town.

Since the days of Mao, this has become an iconic spot, a place to relax and talk about the big issues of the day. In the next few weeks, there will be plenty to discuss and digest, apart from the sumptuous spreads.

Retired leaders, such as elder statesman Jiang Zemin, will probably be there along with the current crop of senior Communist Party members.

“Issues raised by the trade war could be key, including the changes [the trade war] will have on domestic politics, society, foreign policy and ways the country will be governed,” Deng Yuwen, the former deputy editor of the Study Times, the newspaper of the Central Party School, a leading CCP academy, told the South China Morning Post.

During the past few months, there have been subtle but distinct changes taking place in the corridors of power in Beijing as Xi’s administration grapples with challenges on numerous fronts, including the breaking scandal about “faulty vaccines,” which has gone viral on social media.

Signs of cooling

At home, the economy is showing signs of cooling while a rare public debate is raging in China’s state-run media on how to proceed with the war on debt without pushing growth into the deep freeze.

The waters, unlike at Beidaihe, are also choppy on the international front with President Donald Trump threatening last week to slap more tariffs on a range of Chinese imports worth US$500 billion as the trade conflict escalates.

Even the European Union has made it clear that Beijing must further open up its economy, pull back from excessive state subsidies and stop the practice of forced “technology transfers.”

On the international scene, Xi’s much-vaunted Belt and Road Initiative, which will connect China with 68 countries and 4.4 billion people across Asia, Africa, the Middle East and Europe, has come under fire from influential institutions.

Because of its monumental scope, there are “sovereign debt risks” lurking in the background of the planned “$8 trillion network of transportation, energy, and telecommunications infrastructure” projects, the Center for Global Development, a Washington-based think tank, pointed out, which was underscored by the IMF.

“Belt and Road provides something that countries desperately want – financing for infrastructure,” John Hurley, a visiting fellow at the Center for Global Development and co-author of the study along with Scott Morris and Gailyn Portelance, said in a statement. “But when it comes to this type of lending, there can be too much of a good thing.”

Indeed, this perfect storm of ‘bad news’ has started to fuel speculation about policy changes and that a major reshuffle in Xi’s inner circle is being considered following an alleged edict about the controversial “Made in China 2025” program.

Earlier this month, a leaked document “purportedly sent to” state-run “media outlets” was published by China Digital Times and reported by Asia Times. It spelled out concerns about how the press should cover a “protracted conflict.”

“Don’t follow the American side’s fluctuating declarations,” the document stated. “Play down the correlations between the stock market [slump] and trade [dispute. And] do not make further use of ‘Made in China 2025,’ or there will be consequences.”

‘Trade war’

Significantly, Yukon Huang, a senior fellow at the Carnegie Endowment and author of Cracking the China Conundrum: Why Conventional Economic Wisdom Is Wrong, highlighted what was at stake in an opinion piece for Caixin, a respected media group based in Beijing.

“The current trade war between the United States and China is not about trade,” Huang said. “This war is about protecting the technological edge that has made the United States the world’s dominant economic power.”

Failure to stop the spiraling dispute from getting out control has been blamed on Liu He, Xi’s confidante and economic adviser, according to the Nikkei Asian Review, quoting an unnamed source.

There have even been suggestions that his boss is coming under pressure from dissenting voices inside the CCP based on the ‘article and picture count’ in the media.

On July 9, Xi disappeared from the front page of the People’s Daily only to dominate it again on Sunday in a splash of photographs and articles about his Middle East and African tour. It was a similar story on Monday in the digital versions of the Global Times, run by the People’s Daily, and the English-language flagship publication the China Daily.

Naturally, analysts and academics have been dissecting every sentence for nuance pumped out by the propaganda department as they try to link a perceived chain of events. Still, in the weeks ahead, they would love to be flies on those sun loungers at Beidaihe beach.

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