AFTER DECADES where China’s National People’s Congress was an exercise in managing rampant economic growth, this year’s parliamentary session in the Great Hall of the People took place against a backdrop of a starkly downbeat economic scenario. A combination of political and economic factors has left the Communist Party leadership facing a tough task maintaining stability.
The target of a 7.5 per cent growth rate for 2012 is the lowest for eight years. Crisis in Europe means a slowdown for Chinese exports in its biggest market. There was a surprisingly hefty decline in exports, which pushed China’s trade €24 billion into the red in February, the largest deficit in a decade in the world’s second largest economy.
And then came yesterday’s shock, the news that Bo Xilai, Communist Party boss in the vast municipality of Chongqing, had been sacked. This was the man who consistently outmanoeuvred Europe in trade talks when he headed China’s team, who led a “red revival” in Chongqing – which has a population of 32 million – and who had ambitions to be on the all-powerful Standing Committee of the Politburo. His sacking has enormous ramifications for the smooth transition of power from President Hu Jintao to Vice President Xi Jinping at the 18th Party Congress later this year. It also has major repercussions for how China will respond to its current economic slowdown.
Bo’s fate looked sealed after his protégé Wang Lijun, his long-time police chief, turned up suddenly at the US consulate in nearby Chengdu. Wang is now being investigated in Beijing. What stood out was a comment Bo made during the NPC, as it illustrates that what is going in within the secretive cabal at the heart of power in China is a fundamental clash about how to manage the economy. “If only a few people are rich, then we are capitalists. We’ve failed,” Bo said, in a call for a return to the values of the good old days of red culture. We now know that he was fighting for his political life. But he was also setting out a stall for the wing of the party that has a traditional, state-dominated vision of socialism.
In the other corner was outgoing premier Wen Jiabao who came out with stinging criticisms of Bo’s comments, insisting political reform was vital as otherwise economic reform was impossible. He criticised Bo for encouraging nostalgia about the days of Chairman Mao, warning of a return to the “chaos of the Cultural Revolution”. Within hours of Wen’s speech, Bo was sacked.
Although there are clearly deep ideological divisions at the top of the Communist Party, the Bo affair shows that the extremists and the left wing have been dealt a serious blow. The way is clear for the outgoing administration, under Hu and Wen, to get the Party and the economy back on track before handing over to Xi Jinping and Li Keqiang. But single-party rule needs consensus at the top table to work. Managing the expectations of the fallen Bo’s support base in the leadership is going to be tough. Maintaining equilibrium, with so many challenges coming at once, will be a major test of the Communist Party’s ability to run China.