Handling of US trade dispute causes rift in Chinese leadership: sources

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Under Xi, officials have become increasingly confident in proclaiming what they see as China’s rightful place as a world leader, casting off a long-held maxim of Deng Xiaoping, the former paramount leader who said the country needed to “bide its time and hide its strength.”

That confidence has been apparent as the government pushes its Belt and Road initiative to develop trade routes between East and West and takes a hard line on territorial issues such as the South China Sea and Taiwan.

Hu Angang, an economics professor at Tsinghua University and an expert in the field of “Chinese exceptionalism”, is one prominent advocate for the view that China has achieved “comprehensive national power.”

In recent weeks, Hu has faced a public backlash, with critics blaming him for making the United States wary of China by trumpeting and exaggerating its relative economic, technical and military might.

That view of Hu is also shared by some people in official circles, according to the policy advisor.

Hu declined to comment when contacted by Reuters.

The cracks within the party come as China’s stock markets and currency have slumped, and the government has struggled to shore up the economy to cushion the impact of the trade war.

China in recent weeks has encouraged more lending and pledged to use fiscal policy – including tax cuts and more funding for local governments – to combat slowing economic growth and rising uncertainty driven in part by the escalating trade war.

Xi has had other fires to hose too, including public anger over a vaccine fraud case and protests in Beijing this week by investors in failed online lending platforms.

Meanwhile, top leaders are believed to be meeting for secretive annual talks, most likely at the seaside resort of Beidaihe, leaving a policy vacuum as Xi and other officials all but vanish from state media. Based on what has happened in previous years, that could be for up to two weeks.

It is unclear if Wang, the propaganda boss, will face any consequences, and there may be other reasons for the tensions within the party related to him.

A third source with ties to the leadership told Reuters the tension had to do with Wang opposing a cult of personality that has been forming around Xi.

Wang still features in state media and diplomats and leadership sources say he is unlikely to be removed from the Standing Committee, the party body that runs China, in what would be an unprecedented move.

Though official media has in recent days been filled with defiant commentary regarding the United States and the trade war, there have been signs of a shift in China’s messaging.

Beijing has begun downplaying Made in China 2025, the state-backed industrial policy that is core to Washington’s complaints about the country’s technological ambitions.

State television’s English-language news channel CGTN, which is aimed at foreigners, has also been focusing on how ordinary Americans will be affected by more expensive prices for cheap made-in-China consumer goods and the damage tariffs will do to the U.S. economy.

But the thinking in Chinese government circles is that the damage has already been done – and that China has learned the hard way that its domestic propaganda is now being scrutinized abroad in a way it never was before.

“It’s impossible for China to ‘bide its time and hide its strength’, but at least we can control the volume of our own propaganda and tell China’s story the proper way,” the policy insider said.

“When the size of China’s economy was small, it got little outside attention but China is now closely watched.”

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