An intermediate court in the Chinese city of Hefei on Monday formally imposed a suspended death sentence on Gu Kailai, the wife of the dismissed Chongqing party secretary Bo Xilai, for the murder of her British business partner Neil Heywood last November. Gu had pleaded guilty to the charge.
The judge declared that the death penalty had been suspended as a result of a medical report on Gu’s mental instability. The sentence was undoubtedly a political decision made at the top levels of the Beijing regime amid sharp factional struggles inside the Chinese Communist Party (CCP) prior to its upcoming 18th congress.
Gu publicly declared that she accepted the sentence as a “just” decision, clearly hoping that her cooperation would lessen the impact on her family. Her husband Bo has been locked up in an unknown location since March and her son is now in the US. Several of Gu’s accomplices, including Chongqing police officials who sought to cover up Heywood’s murder, were given lengthy jail terms.
Now that Gu has been sentenced, attention will turn to Bo, whose fate will be determined by ongoing factional manoeuvring inside the CCP, principally between President Hu Jintao’s Young Communist League faction and former President Jiang Zemin’s so-called Shanghai gang. Bo, who had been slated to take a position in the party’s top Politburo Standing Committee, was more aligned to Jiang’s faction.
The 18th party congress is particularly significant as Hu will hand over power to the next generation of leaders, headed by current Vice President Xi Jinping. Xi is regarded as a compromise figure between the two factions. Hu’s main representative in the new leadership is Li Keqiang, who is set to become premier. According to a Reuters report, Hu is also seeking to install former Young Communist League secretary Hu Chunghua in the Politburo Standing Committee and position him as Xi’s successor.
At the heart of the power struggle is a battle over economic policy, under conditions of a worsening global breakdown that is sharply slowing the Chinese economy. Both factions control various state-owned monopolies, have established connections to major Western banks and corporations, and support the pro-market agenda that has transformed China into a giant cheap-labour platform.
Bo had become a figurehead for sections of the bureaucracy that advocate using the state sector—including the state-owned banks and monopolies—to try to restrict or regulate international competition and protect Chinese corporations. In Chongqing, he encouraged partnerships between state-owned enterprises and foreign corporations, which were attracted by the low wages and taxes.
Bo’s factional opponents are more closely connected with private entrepreneurs and transnational corporations. They have criticised the so-called Chongqing model, demanded an end to “unfair” protection for “red” cronies, and called for an extension of the “free market” to further encourage foreign investment.
The country’s economic slowdown brought matters to a head. Despite the fact that many state-owned enterprises were shut down or sold off in the 1990s and early 2000s, some 110,000 state-owned enterprises remain. They now account for two-thirds of China’s non-agricultural gross domestic product (GDP). The 120 largest, which are directly controlled by the state-owned Assets Supervision and Administration Commission (SASAC), have paper assets of $3.7 trillion and made a combined profit of $129 billion last year.
These huge profits depend on the continuation of state-sanctioned monopolies in key sectors such as oil, finance and telecommunications. Since the eruption of the global financial crisis in 2008, Western corporations have stepped up their demands for an end to China’s state-owned monopolies and access to these highly profitable economic sectors. As the Chinese economy has slowed, the dominant CCP faction led by Hu concluded that the only means of maintaining high growth rates was to encourage a massive injection of new foreign investment by further opening up the Chinese economy.
The scandal that erupted around Bo certainly exposed the way in which he used his position to enrich himself and his family members. But Bo is hardly an exception in the CCP bureaucracy, which is riven from top to bottom by corruption. Bo was particularly targeted to destroy his political credibility and discredit the “Chongqing model” that had been widely championed in the Chinese press, particularly by “New Left” scholars. This broad, heterogeneous grouping is not opposed to the profit system, but criticises “neo-liberal” policies and advocates social welfare measures and environmental policies to ameliorate the worst aspects of Chinese capitalism.
Leading New Left figure Cui Zhiyuan from Tsinghua University went to Chongqing and was dubbed Bo’s “red professor.” An article posted last year on the China.org.cn web site, which is run by the State Council, explained that Cui described himself as a “Liberal Socialist.” It continued: “Given the current budgetary crises in the West, he believes Chongqing can serve as example for other countries as well as China. The key is that a profitable public sector can finance government spending, including on social programs.”
In fact, what was taking place in Chongqing was only a variant of processes throughout China. Bo went further in more completely stripping farmers of their land and providing greater state subsidies to foreign investors. He forced local state-owned enterprises to contribute greater amounts to government revenue, which he used to cut the private corporate tax rate to just 15 percent, compared to 25 percent in other provinces. Low taxes and cheaper labour in inland Chongqing compared to coastal Chinese cities attracted electronic giants such as HP and Foxconn and encouraged other foreign corporations, including Ford, to establish joint ventures. As a result, Chongqing’s GDP doubled over the past five years.
All of this was dressed up with a superficial “red” colouration, including Bo’s campaign to revive the singing of Mao-era songs and his introduction of limited social concessions such as cheap accommodation for rural migrant workers.
The “Chongqing model” always rested on shaky economic grounds. Much of the revenue provided by state-owned enterprises derived from unsustainable property speculation. Like the rest of China, Chongqing relied on exports that are now sharply slowing, raising the prospect of social unrest.
The Hu leadership decisively turned against the “Chongqing model” in February— just weeks before Bo’s removal. They adopted a major World Bank report calling for full-scale privatisation and a vastly reduced role for the state. The choice of new leaders reflected this orientation—Vice President Xi presided over the so-called “Zhejiang model”, known for its promotion of private business. Wang Yang is the party secretary of Guangdong, China’s leading export hub.
The Hu leadership was also concerned that Bo’s populist appeals would heighten the expectations of the working class precisely when further inroads will have to be made into wages and conditions to meet the demands of investors. Wang publicly declared at a provincial party congress earlier this year that the party should put an end to the popular notion of “dependency on the government”—that is, even limited social services.
The sentencing of Bo’s wife is also a judgement against Bo, his factional supporters, the so-called New Left grouping and the “Chongqing model”. While there could be further twists and turns in the inner-party factional struggle, the dominant CCP leadership is preparing to use the 18th congress not only to install new leaders, but to launch a far reaching assault on the social position of the working class.