US trade dispute causes rift in Chinese leadership

Beijing

A GROWING trade war with the United States is causing rifts within China's Communist Party, with some critics saying that an overly nationalistic Chinese stance may have hardened the US position, according to four sources close to the government.

President Xi Jinping still has a firm grip on power, but an unusual surge of criticism about economic policy and how the government has handled the trade war has revealed rare cracks in the ruling Communist Party.

A backlash is felt at the highest levels of the government, possibly hitting a close aide to Mr Xi, his ideology chief and strategist Wang Huning, according to two sources familiar with discussions in leadership circles.

A prominent and influential academic whose views have found favour in some party quarters has also come under attack for his strident views on Chinese power.

Mr Wang, who was the architect of the "China Dream", Mr Xi's vision for China to become a strong and prosperous nation, has been taken to task by the Chinese leader for crafting an excessively nationalistic image for the country, which has only provoked the United States, the sources said.

"He's in trouble for mishandling the propaganda and hyping up China too much," said one of the sources, who has ties to China's leadership and propaganda system.

The office of the party's spokesman did not respond to a request for comment on Mr Wang and his relationship with Mr Xi, or on whether China had erred in its messaging in the trade war.

There is a growing feeling within the Chinese government that the outlook for China has "become grim", according to a government policy adviser, following the deterioration in relations between China and the United States over trade. The adviser requested anonymity.

Those feelings are also shared by other influential voices. "Many economists and intellectuals are upset about China's trade war policies," an academic at a Chinese policy think- tank told Reuters, speaking on condition of anonymity due to the sensitivity of the issue. "The overarching view is that China's current stance has been too hard-line and the leadership has clearly misjudged the situation."

That view contrasts with the thinking at the beginning of the year of many Chinese academics who had touted China's ability to withstand the trade row in the face of US President Donald Trump's perceived political weakness at home. China thought it had reached a deal with Washington in May, but was shocked when the Trump administration, in Beijing's eyes, went back on that agreement.

"The evolution from a trade conflict to trade war has made people rethink things," the policy adviser said. "This is seen as being related to the exaggeration of China's strength by some Chinese institutions and scholars that have influenced the US perceptions and even domestic views."

One official who is familiar with China's propaganda efforts said that the messaging had gone astray. "In the trade war, the line of thinking in the propaganda has been that Trump is crazy," said the official. "In fact, what he is scared of is us getting strong."

Under Mr 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 that 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, and takes a hard line on territorial issues such as the South China Sea and Taiwan.

Hu Angang, an economics professor at Tsinghua University, is one prominent advocate for the view that China has achieved"comprehensive national power". In recent weeks, he has faced a public backlash, with critics blaming him for making the US wary of China by trumpeting and exaggerating its relative economic, technical and military might.

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

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

Mr 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. REUTERS