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Foreign business in China after the downfall of Bo Xilai

By Shujie Yao.

The sudden dismissal of Bo Xilai as party chief of Chongqing Municipality on Thursday was a shock in China and for western business. It will not mean an end to economic reform or China’s open-door policies. But it will stop political reform in its tracks and encourage collusion between local government and business.

Bo had been a champion of social justice and the fight against organised crime involving government officials in Chongqing.

He took Wang Lijun from Liaoning to take charge of the Chongqing Police Bureau in 2008. Wang launched a reckless battle against his predecessor Wen Qian, hundreds of other local officials, many businessmen and others who were suspected of involvement in organised crime. In less than three years, Wen Qian, many corrupt officials and some rich businessmen were sentenced to death. Hundreds more were imprisoned.

In the meantime, Bo launched a campaign to persuade Chongqing’s citizens to sing ‘red songs’ that were popular during Mao’s time, invoking Mao’s spirit and social justice to reduce corruption.

Under Bo’s leadership, various policies were implemented to improve living conditions and infrastructure in Chongqing. Other reforms were brought in to accelerate urbanisation, reduce poverty, integrate rural migrants into city life, and build low-rent housing for the poor and low income households, and so on.

Economic growth has been significantly faster than in the rest of the country and Chongquing’s achievements have been praised as the ‘Chongqing Model’, regarded as superior to the ‘China Model’.

Bo must have made many enemies over the years. The unexpected defection of Wang Lijun, his hand-picked political ally, to the US Consulate in Chengdu on February 8 must have been a vital blow to his political future. Now he has gone.

In China, this means that any meaningful political reform is on hold. The next generation of leaders will follow the tradition of stability and harmony and tolerate a high degree of corruption and state monopoly.

For western business, the removal of Bo may mean little. It could be seen as a threat to their ability to benefit from China’s open-door and economic reform policies. But such concerns may not be necessary because openness and economic reform are common objectives of all the party and state leaders.

Bo’s dismissal can be considered as a pure political fight. His removal will not and cannot change China’s course of reforms. To maintain stability and harmony, some sacrifices, including big sacrifices, have to be made. Bo is such a big sacrifice. The vast majority of high level politicians were not prepared to be challenged or threatened by him, were he to become a top leader after the 18th Party Congress later this year.

Vested interests will be cemented by Bo’s departure. Corruption and social inequality in China may get worse for a long time before getting better. Few politicians will dare to do anything similar to what was tried out in Chongqing. This is not a win-lose game between the left and the right. Nor is it a win-lose game between reformers and conservatives.

Another possible outcome is that local governments will engage more closely with business and ‘organised’ activities will become more visible for the coming decade. Foreign investors may be able to enjoy more government support. But they should be aware that business-political collusion will have to be controlled sooner or later.

Shujie Yao is Senior Fellow in the China Policy Institute, and professor and head of the School of Contemporary Chinese Studies at the University of Nottingham.

This article was firstly published in The Financial Times under the title of  ‘the fall of Bo Xilai and the implications for foreign business’  on Friday 16 March 2012.

 

Chongqing’s Bo Feels the Pressure as Aide is Put Under Investigation

By Zhengxu Wang.

On Tuesday, explosive news hit the internet in China concerning the vice mayor of Chongqing in China’s southwest and how he had sought asylum in the US Consulate in Chengdu, the capital of Sichuan Province, a three hour drive from Chongqing. Wang Lijun, the police chief of Chongqing who has led forceful campaigns which have cracked down on gangsters, was elected Vice Mayor in September last year. On the 3rd of February, the Chongqing government announced that in a round of changes to the division of labour, Wang’s portfolio had shifted from law enforcement to the softer areas of culture and education.

That made big news right away, as rumours spread on the internet that he had fallen out of the favour with the Chongqing leadership and was now facing corruption and other charges. In subsequent days he appeared in the official media, visiting universities and similar places, telling the reporters that he was learning about the responsibilities of his new position.

Suddenly, news then appeared that he went into the US Consulate. China’s security forces surrounded the Consulate compound and he was later taken away by the State Security Bureau personnel as required by the country’s central leadership in Beijing.

The public in China was left greatly confused and perplexed as regards what happened. Fierce speculation ensued. The microblog site at Sina.com has seen several million posts about this incident in the last two days.

The US government later confirmed that he sought a meeting at the Chengdu Consulate. The Chinese official Xinhua News agency later confirmed that Wang “entered and stayed in” the US Consulate and his actions are now under investigation by authorities.  Seeking a meeting with US officials without clearing the matter with his leaders were a violation of state laws and party rules, to say the least.

What really lies behind this? To make sense of it we need to put the incident in the larger context of China’s elite politics as the Party approaches its five-yearly Congress due later this year. At the Congress, power transition from the current leadership to the next is due to take place, and nine persons will be chosen to sit in the Party’s Politburo Standing Committee, effectively becoming the top rulers of China for the next five to ten years.

Among the contenders for these positions is the Party Secretary of Chongqing, Bo Xilai, who has fiercely campaigned to reach such a goal over the last two to three years. He gained popularity in some sectors of Chinese society, including the leadership, by launching a crack-down on crimes and gangsters and by promoting the revival of revolutionary culture.

His “fighting the black” (cracking-down on Chinese mafia) and “singing the red” (singing revolutionary songs) campaigns were accompanied by an increasing chorus among media and scholars who have praised the “Chongqing Model” of development, in which the government plays an active role in the promotion of economic development and raises prospects for the underclass, achieving more equitable income distribution. For some observers, he looked promising as a candidate to secure a slot in the Politburo Standing Committee this Autumn.

But apparently some of the top leaders do not favour him. Since late 2009, the Central Committee sent investigative missions to the City, partly to put a check on the fever of both “fighting the black” and “singing the red,” but probably also to take note of possible mismanagement, corruption, incompetence and other problems in City governance that may be used to thwart Bo’s political ambitions.

Wang’s election to the position of Vice Mayor probably marked the climax of Bo’s successes in Chongqing. But very soon Bo started to face strong headwinds. When Wang was removed from his law-enforcement portfolio, it became very clear that the Centre is putting pressure on Bo.

How far the Centre was prepared to go after Bo remains unclear and whether Bo will suffer a similar fate of the former Shanghai Party Secretary Chen Liangyu, who was removed from office and sentenced in court after being disobedient to the Centre, are matters yet to be found out.

In the last few days people have still been busy guessing and then came the explosive news of Wang’s alleged attempt to defect. What an interesting time to watch Chinese politics.

Dr Zhengxu Wang is Deputy Director of the China Policy Institute and Lecturer at the School of Contemporary Chinese Studies, University of Nottingham.

Opinions expressed in the CPI blog do not represent the views of the China Policy Institute or the School of Contemporary Chinese Studies at the University of Nottingham. They are the personal views of the bloggers/authors.

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