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Chinese leaders' Beidaihe gathering will offer muddle, not answers

Hong Kong protests and US trade war on agenda for Xi Jinping and Politburo

| China
"Grey-zone" tactics including the use of club-wielding thugs to attack protesters in Hong Kong are already on display.   © Reuters

Beidaihe, the seaside resort 180 miles east of Beijing, occupies a special place in Chinese politics. At the end of July and beginning of August each year, members of the Politburo and other senior Chinese officials gather here to escape the sweltering heat of Beijing -- and make critical policy and personnel decisions.

President Xi Jinping and his colleagues may have little time to enjoy the cool breeze when they meet at Beidaihe in the coming weeks because they have to deal with the escalating crisis in Hong Kong, the continuing trade war with the U.S. and a long list of urgent economic and foreign policy issues.

Topping the agenda at Beidaihe will most likely be the monthlong crisis in Hong Kong, which was triggered by the city government's attempt to pass an extradition bill that could endanger the liberties of the people of Hong Kong.

So far, the Chinese government has been relatively restrained, apparently in the hope that the protest movement will peter out. But this approach no longer seems viable in the wake of recent escalations.

Anti-government protesters vandalized Beijing's liaison office in the former British colony on July 21. A day later, club-wielding thugs, suspected to be hired by pro-Beijing elements, violently attacked protesters and innocent bystanders. The events in Hong Kong seem to be spinning out of control.

But ordering a violent crackdown is unlikely to appeal to Xi and his colleagues at Beidaihe. One obvious obstacle is that such a move, covered live by international media, could devastate China's image and even derail the trade talks with Washington.

Another inconvenience is that a brutal suppression of the protests in Hong Kong over August and September will definitely ruin the extravaganza the Chinese Communist Party has planned for the 70th anniversary of the founding of the People's Republic on October 1.

These constraints will force Xi and his fellow Politburo members to postpone decisive actions until after October 1, or even wait after next January's presidential election in Taiwan, since a crackdown in Hong Kong is almost certain to outrage the voters in Taiwan and deliver the presidency to the pro-independence Democratic Progressive Party.

The most likely alternative is to adopt "grey-zone" tactics -- actions stopping short of a direct military response -- to contain the protests in Hong Kong. Indeed, such tactics, including counter-demonstrations by pro-Beijing groups, the use of thugs to attack and intimidate protesters and the escalation of force by the local police, are already on display.

However, this short-term approach is also fraught with risks. In the worst-case scenario, deploying thugs who are members of criminal organizations could result in deadly clashes with protesters. The ensuing chaos may force Beijing's hands regardless of the prohibitive political costs.

Another top agenda item at Beidaihe will be Sino-American relations. With the two countries now headed for an open-ended strategic conflict, Xi and his colleagues will have to deliberate on policy options that address both short-term and long-term imperatives.

The most pressing short-term priority is obviously ending the trade war with the U.S. But the terms put on the table by Washington, such as keeping some of the tariffs on Chinese goods even after the conclusion of a deal and demanding strict and unilateral enforcement mechanisms, are hard for Xi to swallow.

With the clock ticking and the chances of a compromise dwindling even further as the American presidential campaign season advances, Chinese leaders will have to decide quickly whether to accept an unfavorable deal to buy more time, de-escalating tensions with the U.S. and creating better conditions for improvement in mutual ties, or dig in their heels for a likely escalation in the trade war if President Donald Trump makes good on his threat to levy tariffs on an additional $300 billion of Chinese imports.

By pure coincidence, the stalled trade talks with Washington are likely to resume around the time of the Beidaihe conclave. Should this be the case, top Chinese leaders will have a chance to take or reject Washington's final offer on the table. Whatever they decide, we should have a better idea of where the trade war is headed at the end of August.

Looking beyond the trade war, Chinese leaders gathered at Beidaihe will be thinking hard about a long-term strategy to deal with a U.S. apparently determined to thwart China's rise.

The most desirable but least likely course of action would require China to counter America's containment strategy with more openness and reform. The surest way for the CCP to follow the Soviet Union into the graveyard of history is to close itself off from the outside world, make more enemies than needed, and waste its limited strategic resources.

Instead of seeking economic and technological self-sufficiency and continuing risky expansionist projects abroad, Beijing should speed economic reform at home; accelerate opening to the West -- especially to American companies despite Washington's discouragement; curtail its geopolitical ambitions; and immediately roll back controversial projects.

These projects include the costly Belt and Road Initiative and 16+1 project aimed to expand China's ties with eleven EU member states and five Balkan countries.

A bridge construction site of the Bar-Boljare highway in Montenegro, pictured in June 2018: Beijing should roll back costly foreign policy proposals including 16+1 project.   © Reuters

While this may be the most sensible strategy for Beijing to take, the chances of its adoption at Beidaihe are relatively small because it will necessitate radical changes in Beijing's economic policies and geopolitical mindset, as well as abandoning Xi's signature foreign policy projects.

What is most likely to emerge from Beidaihe is a muddling-through strategy that relies on incremental measures to address specific problems but offers no clear overall directional change. To be sure, Chinese leaders will talk loudly about opening their country to the outside world and allow foreign companies to enter more previously closed sectors, such as financial services.

But such marginal steps will not signal a decisive turn away from the state-capitalist model or alleviate international concerns about China's geopolitical ambitions.

This rather downbeat forecast of the potential outcome of this year's Beidaihe meeting may disappoint those hoping that Chinese leaders will quickly return to a strategy of pragmatism and restraint so that they can sustain the country's economic progress and avoid a calamitous cold war with the U.S.

The sad reality is that, absent a catastrophe on the scale of Mao's Cultural Revolution, the ideological values, closed policy-making process and personalized rule of China's current one-party state make such a shift exceedingly difficult, if not impossible.

Sadder still is that most Chinese leaders packing their bags for Beidaihe also know this -- but are powerless to do anything about it.

Minxin Pei, a professor of government at Claremont McKenna College and the author of "China's Crony Capitalism," is the inaugural Library of Congress Chair in U.S.-China Relations.

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