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Cary Huang


In theory, the most important political event of the year in China is the annual plenary session of the ruling Communist Party's top decision-making Central Committee in Beijing in the autumn.
But, in practice, the biggest policy decisions of the year are made in the summer at an informal summit, held in the popular beach resort of Beidaihe .
This meeting in Hebei province, also known as the "informal summit", will decide what leaders will officially approve when they gather at a hotel in the capital a few months later.
The Beidaihe meeting usually convenes during the dog days of August, while the party plenum kicks off in the cooler period between October and November.
The secretive seaside conclave gained pre-eminence in policy making because the decisions made there have often reflected the consensus within the party between its leaders and the party elders who also invited to attend such its informal closed-door discussions.
In the decades since it became the party's summer political centre in 1954, the most famous event to occur at Beidaihe was chairman Mao Zedong's decision in 1958 to shell Quemoy island, the closest Kuomintang outpost to the mainland.
It was also the backdrop for the interview of former President Jiang Zemin with US journalist and CBS host Mike Wallace in 2000.
Each party congress lasts for five years and, with the exception of the first year, there is usually one annual plenary session. Usually the first plenum introduces the new party leadership and the second plenum focuses on the line-up of government personnel. The third is usually seen as the first plenary session at which the new leadership has basically consolidated power and can introduce a broader economic and social development blueprint. The fourth is all about politics, law and party building; and the fifth centres on the next five-year plan.
China's 12th five-year plan ends this year and last week a Politburo meeting chaired by President and Communist Party chief Xi Jinping announced that the party's 205-member decision-making Central Committee would convene its fifth plenum in October to discuss the draft successor plan.
The forthcoming Beidaihe gathering will first approve the guiding principles for the plan's draft, from which economic planners from central agencies and ministries will be able to work out the final document to be officially approved by the party plenum.

Analysts said that ongoing economic issues and the long-awaited reform of state-owned enterprises would also be the main themes of this year's conclave as the country grappled with a stubborn slowdown. The stock market crash has cast further doubt over the outlook of the world's second-largest economy.
"I should expect the economy to be at the top end of the agenda at the Beidaihe meetings," Steve Tsang, chair of the School of Contemporary Chinese Studies at the University of Nottingham, said.
The slump in share prices over the last few weeks will delay the slow economic recovery, complicate macroeconomic management, damage the government's credibility, trigger social discontent, and also undermine the authority of Xi's leadership.
The stock market crash came after national growth slowed to 7.4 per cent last year - the lowest level for a quarter of a century - followed by 7 per cent in the first half of this year.
Many economists already think growth this year will miss the government's targeted 7 per cent rate, with many international institutions lowering their forecasts for the country's growth. For instance, the International Monetary Fund expects a 6.8 per cent growth rate this year to be followed by 6.25 per cent in 2016.
China watchers also said Xi's recent trips to regions before the Beidaihe summit had highlighted the leadership's policy priorities. In May, Xi made a high-profile trip to Zhejiang where he met leading officials from seven regions in east China - Shanghai, Anhui , Fujian , Jiangsu , Jiangxi , Shandong and Zhejiang.
I should expect the economy to be at the top end of the agenda at the Beidaihe meetings
Steve Tsang, University of Nottingham
From July 16 to 18 Xi made a high-profile trip to northeastern Jilin province. During these visits, Xi wasted no time in giving assurances that the outlook for the economy was good despite downward pressure. Xi has also focused his discussions with regional officials on SOE reform and the drafting of the 13th five-year plan.
Most analysts said leaders would discuss the stock market, following a three-week 32-per-cent slump in share prices since a mid-June peak, which prompted government intervention. In just eight months up to the middle of June, share prices jumped by 150 per cent as state media and policy makers publicly encouraged investors to buy stocks.
Tsang said the economic slowdown or the "new normal", which included the stock market slump, was clearly an issue that would require the top leadership to devise a plan to manage it and take things forward.
Jing Ulrich, vice-chairwoman of Asia Pacific at JP Morgan, said she expected the conclave to come up with a macroeconomic policy that supported growth.
"With the recent stock market turbulence, monetary easing in the form of a policy rate cut and RRR [reserve requirement ratio] cut is likely to continue in [the second half of this year] to help stabilise investor confidence in the stock market," Ulrich said.
In an effort to support real economic growth, the government would continue to address near-term fiscal constraint and encourage more infrastructure investment, she said.
Some of key measures in this regard included expanding the local government debt-swap programme and promoting more public-private partnership funding arrangements, she added.
Investors are concerned that the share slump will affect the party leadership's agenda on market-oriented reform, particularly the overhaul of SOEs and the country's financial and banking system - the last remnant of the Stalinist command economy.
However, China's state-run media outlets have reported that the leadership will speed up SOE reform in the second half of this year despite the stock-market setback and will come up with an announcement of the detailed plans in the coming months.
Linda Lim, of the Ross School of Business at the University of Michigan, said she believed Beijing had identified SOE reform and financial market liberalisation as key elements of the long-term objective of ensuring sustainable GDP growth and rising incomes for the people.
The government was in a dilemma over whether to give policy priority to growth or reform, with some officials believing that the "visible hand" always outplayed the "invisible" one, Lim said.
However, increasing private ownership of SOEs and allowing more competition from private companies would make SOEs - and therefore the economy - more efficient, thus fostering growth, Lim said. This would also give households and businesses access to additional, more secure and profitable investment outlets for their savings.
She said that the more efficient, productive and profitable SOEs would increase consumption and this would also stimulate GDP growth.
Xi ... can be expected to press on even more boldly, in order to send a clear signal that the general secretary is not for turning
Steve Tsang
Tsang said that despite the recent problems, Xi appeared to remain confident and unshakeable in pushing the party on in the direction he had chosen.
Nevertheless, the setbacks would have raised questions in the minds of some people - particularly those unhappy about Xi's actions over the past three years - about whether the president could be persuaded to re-think his plans.
"Xi must be aware of that and can therefore be expected to press on even more boldly, in order to send a clear signal that the general secretary is not for turning," Tsang said.
Some economists said the reform of both capital markets and SOEs could be linked closely. Ulrich said the stock market turbulence might affect the pace of domestic capital market development, which could, in turn, impede the smooth implementation of SOE reforms.
Economists have also expressed concerns over the reform of SOEs, saying that, if there was no decision about how to accelerate the diversification of SOE ownership, China was likely to experience a period of stagnation, akin to that experienced in Japan after the property bubble burst in the early 1990s.
Li-Gang Liu, chief China economist at ANZ Research, said that Beidaihe decisions would affect not only the pace of China's financial liberalisation in future but also how to best carry out financial market liberalisation - such as allowing the yuan to be exchanged for foreign currency without any limits on the amount. It is hoped that China's financial liberalisation will not be held up.
"Unfortunately, the latest policy signal appears to show that the mixed ownership reform could be further delayed," Liu said.
Some China watchers said the stock market setback would undermine Xi's authority.
However, Tsang said that despite the stock market failure, Xi remained powerful, and that by confidently projecting his power and determination, he should be able to deter enemies within.
"The official handing over of [former presidential aide] Ling Jihua to the judiciary was probably timed to send such a message," Tsang said.
The party leadership announced on July 20 that Ling, 58, who was once the top adviser to former President Hu Jintao , would be prosecuted on corruption charges and other crimes.
Observers said personnel matters would also be discussed in the informal setting of Beidaihe as leaders looked ahead to a new leadership team being formed at the 19th party congress in 2017.
The leaders will discuss the next step in the anti-graft campaign, following the decision to prosecute Ling, the most recent senior official to be dealt with. His fall comes after the sentencing of former Chongqing party boss Bo Xilai , former security chief Zhou Yongkang , and the death of Xu Caihou , the former vice-chairman of the Central Military Commission, who together were reportedly known as the "new Gang of Four".
There will also be discussions about foreign policy as Xi is to travel to the US for summit with US President Barack Obama shortly after the conclave.
 

TIDAL SHIFTS
Late 19th century – The Qing government establishes Beidaihe as a summer resort for wealthy Chinese and foreign diplomats
1911-1949 – The Nationalist government earmarks Beidaihe and Lushan in southern China as the two major summer resorts for government officials
1954 – The leadership begins relocating to Beidaihe during the summer
1958 – Chairman Mao Zedong decides to shell Quemoy island
1966-1976 – The leadership stops the summer meetings during the Cultural Revolution
1984 – Deng Xiaoping meets Samuel Chao Chung Ting, a Chinese-American Nobel Prize laureate in physics
1992 – Deng goes to Beidaihe for the last time 
2000 – President Jiang Zemin is interviewed by CBS journalist Mike Wallace
2001 – The government starts inviting experts to holiday in Beidaihe
2003 – Hu Jintao, the new president and party chief, calls off the Beidaihe meeting
2005 – Hu meets Lu Zhengcao, 101, one of the two living original PLA generals
2014 – President Xi Jinping meets experts spending vacation in the resort
 


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China

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Economic issues will be uppermost in the minds of the party elite meeting in coastal Beidaihe


In theory, the most important political event of the year in China is the annual plenary session of the ruling Communist Party's top decision-making Central Committee in Beijing in the autumn.


Beidaihe meeting

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Economic issues will be uppermost in the minds of the party elite meeting in coastal Beidaihe

Economic issues will be uppermost in the minds of the party elite meeting in coastal Beidaihe