China's leaders head for their retreat in Beidaihe

China's ageing leaders start heading for their annual retreat at the Beidaihe beach resort this week to negotiate final details of what could be the first orderly leadership succession of the Communist era.

In secretive meetings at seaside villas, party leaders are expected to decide how to hand over power and revamp the Chinese Communist Party to keep its grip on power.

The expectation has been that President Jiang Zemin (江澤民) and other leaders would retire from their party jobs at a five-yearly congress in September or October and from government jobs at a parliament meeting next year.

Vice President Hu Jintao (胡錦濤), 59, ranked fifth in the party leadership, is Jiang's designated successor.

The key issue to be decided at Beidaihe is whether Jiang can retain his third position as head of the Central Military Commission (CMC) and continue to wield power from "behind the curtain," as did his predecessor Deng Xiaoping (鄧小平).

In the last few months, rumors have swirled that Jiang wants to stay on as party chief to handle the social and economic impact of China's entry into the WTO, as well as its volatile relationship with the US. Other rumors insist Jiang will step down from all posts to cement an unofficial pact not to pursue office after the age of 70, which he used to oust a rival at the 1997 congress.

"China has an unprecedented opportunity for a smooth power transition to the next gene-ration," said one veteran Chinese journalist, who asked not to be identified.

"If Jiang steps down completely, we can really move beyond the era of personality politics to a more institutional system. If he doesn't, new tensions could emerge."

People in political circles in Beijing say party leaders have more or less agreed on a new line-up for the all-powerful seven-man Politburo Standing Committee.

"I think it's more or less decid-ed. It's just a question of thrashing out the final details and installing proteges in influential positions," said one Western diplomat.

Hu, anointed Jiang's successor by Deng 10 years ago, should take over as party general secretary. Zeng Qinghong (曾慶紅), Jiang's protege who heads the party's powerful organization department, is likely to join the standing committee despite being only an alternate Politburo member.

Premier Zhu Rongji (朱鎔基), 73, is almost certain to hand the reins over to vice premier Wen Jiabao (溫家寶), who is already responsible for the critical areas of rural and financial reform.

National People's Congress chief Li Peng (李鵬) is also due to retire and Li Ruihuan (李瑞環) is a favorite to replace him next year.

The meeting at Beidaihe is also expected to address the complex question of how to make the party more relevant to modern China.

The congress is expected to incorporate into the party constitution Jiang's controversial proposal to allow private entrepreneurs to join. Jiang's proposal, announced in a speech last July and enshrined in his "Three Represents" theory, has been widely publicized in the last year but has also drawn fire from the conservative left wing of the party.

The "Three Represents" state that the party represents advanced productive forces, advanced culture and a wide sector of the population, a formula designed to broaden the party's core support base beyond just workers, farmers and intellectuals.

The conservative party magazine Qiushi recently published an article saying private entrepreneurs should never become their own class and warning the party not to forget the workers and farmers it has traditionally represented.