Since time immemorial, or at least the past 60 years or so, the tradition has been that the Chinese leadership from Beijing retires en masse in August to the seaside resort of Beidaihe for ten days of rest, relaxation and unification of thought. It is a time of reflection and calm consideration of policies. And also for tussles between different points of view within the leadership as to policy directions. After the usual 10-day radio silence, the leaders this week emerged from the retreat, and the state media has started to broadcast the messaging that has been agreed upon at the meetings. But this year, the immediate feedback given by the state media following the meetings has been uniquely contradictory. Or at least that is how it appears.
For decades, the factional policy dynamic at the pinnacle of the party could be described as being between economic pragmatists and ideological purists. That was true in the 1960s with Mao and his second-in-command Liu, it was true in the early 80s with Deng on one side and Hua on the other, and it is true today. Leading the ideological purists is the general secretary of the party, Mr. Xi and bearing the standard of the economic pragmatists is second-in-command for the past ten years, Mr. Li. In a fascinating display of nuanced messaging, immediately following the retreat, Mr. Li this week went to Shenzhen and visited the park there which features a massive statue of the man who rescued the system in the late 1970s and early 80s by instituting a wide range of market reforms, Deng Xiaoping. Mr. Li said, as he paid his respects, that Deng’s policy of opening and reform would continue and could not be reversed, just as the Yangtze and Yellow rivers cannot be reversed. Mr. Xi, on the other hand immediately went to Liaoning province in northeast China which very much represents the state-owned enterprise side of China’s economy and paid his respects at a memorial to a battle in 1948 in which the communist Red Army beat out the KMT army, which escaped to Taiwan the following year. This kind of coordinated messaging is in no way random or unplanned. There is a very clear understanding on the part of those who put this together of the impressions it would engender in the minds of both the broad masses, and the wide range of China business people and others with an active interest in which way the wind is blowing. This includes the ruling class of officials across the country. It seems that there are two ways of interpreting this turn of events. One is they are signaling a future balance in the leadership and another is that they are signaling continued struggle and disagreements as to the correct path for China to follow. As to which one is the more likely, the answer is probably both. China is never black-and-white, it is always gray, and there is a genius grounded in that gray which helps stability. On the other hand, what the markets, the entrepreneurs and the investors want is as much clarity as possible and as much comfort as possible on economic pragmatism being the primary factor governing policy in the years to come. And what of the tens of millions of party members and the military and other such interest groups? Do they favor ideological purity on the grounds that to waver from that position threatens the existence of the system? It’s possible.
All will become clearer at the 20th Party Congress, currently expected to be held in October. If these twin visits do signal a dynamic and slightly uncomfortable balance between the two points of view, how will the markets react? Does this doom China to a period of policy stalemate? Or will the dynamism of the balance allow for a path through the current troubles that the party faces that will be acceptable to both sides? Just as in the 1960s and the 1980s, the state of play is currently something that can only be guessed at by reading between the lines of the tea leaves in the state media. An enormous amount is hanging on the result of this discussion, but it is a complex, bewitching and never-ending multi-part drama. As the World Turns, The Days of Our Lives, Chinese Politics.
Have a good weekend.