Subscribe now to receive exclusive updates on Chinese politics and policy. Our myFT Daily Digest email delivers comprehensive news on Chinese politics and policy every morning. Since the 1950s, Chinese Communist Party leaders and their advisors have sought solace in the serene coastal retreat of Beidaihe to escape the summer heat and contemplate the future of the country. This year’s gathering, amidst an economic downturn and escalating tensions with the West, takes on even greater significance. China’s economy recently slipped into deflation as consumer prices declined for the first time since early last year, posing a significant challenge for policymakers striving to revive growth after the pandemic.
In addition to economic challenges, Western allies are considering following President Joe Biden’s decision to restrict American investments in China’s artificial intelligence, chips, and quantum computing sectors. This move, framed as a national security measure, threatens to undo recent efforts to improve US-China relations. In response, Beijing has warned of potential retaliation.
While Chinese leaders at Beidaihe are desperate to revitalize the economy, their ability to do so is hindered by a status quo that prioritizes national security and party control over economic growth. Victor Shih, a professor of Chinese political economy, points out that policies aimed at reducing military spending, internal security, or mass surveillance are off the table. This commitment to security is evident in the heightened security measures surrounding Beidaihe, such as road closures, checkpoints, and bans on certain vehicles and objects.
Beidaihe holds historical significance, as it was the site of pivotal decisions, including the launch of Mao’s disastrous Great Leap Forward in 1958. The retreat, however, has become more low-key due to President Xi Jinping’s ban on government extravagance and his centralized control over economic reforms, which has made it challenging for officials to freely discuss structural changes without fear of retribution. This year’s retreat is further clouded by the absence of Xi’s favored foreign minister and ongoing corruption probes within the military and party.
Some analysts speculate that Premier Li Qiang, Xi’s second-in-command, is preparing to unveil significant policy changes concerning China’s property sector collapse, local government debt, and weak consumer spending. As concerns grow over the health of the real estate sector, there is a growing recognition among Chinese economists and advisors that Beijing needs to prioritize boosting domestic consumption. However, a concrete plan to achieve this has yet to be formulated. As long as Beijing’s GDP growth target exceeds the capacity of the private sector, increased public sector spending and government borrowing will be necessary to drive economic activity.
With the secrecy surrounding the Beidaihe retreat, ordinary Chinese citizens, as well as international investors and businesses reliant on China’s economy, will have to wait anxiously for the outcome of the discussions.
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