Why the state is keen to wrap up Bo Xilai affair quickly


It was China’s trial of the century, the former Chongqing Communist Party boss Bo Xilai, charged with taking nearly 27 million yuan (€3.32 million) in illegal payments from two prominent businessmen, Xu Ming and Tang Xiaolin.

At a court in Jinan, Shandong province, Bo was also accused of corruption and abuse of power and will almost certainly be found guilty when the verdict comes next month.

Those of us among the press corps who have closely followed trade issues here in China were less surprised at the way Bo took over his own trial and started to cross-examine witnesses and terrify those giving testimony.

Though it was supposed to be a show trial, they reckoned without a man who has taken trade talk etiquette to new levels.

As commerce minister, the now-purged Bo was a brilliant negotiator, able to be charming and tough in the same breath. When it came to trade tensions over European socks and Chinese-made bras, Bo demonstrated his ruthless side, facing down the then EU trade commissioner, Peter Mandelson.

End of the affair
The markets will be keen for this whole Bo affair to be over, as it means that president Xi Jinping and his premier Li Keqiang can focus on preparations for the Third Plenum of the 18th Central Committee, which is sure to discuss ways to tackle economic reform.

These plenums carry enormous weight. The plenum in 1978 saw Deng Xiaoping emerge as China’s top leader and subsequent approval of the policy of reform and opening up, after three decades of isolation since the revolution.

It meant the end of the Mao era.

This plenum is likely to be less cataclysmic, but a big focus will be on reforming areas such as the state-owned enterprises (SOEs), and continuing urbanisation and financial reform.

You can see why Xi needs to get things right before he starts to implement reforms.

Selling off strategic state assets would mark a step toward reforming the inefficient companies that crowd out smaller players from the market. Permitting bankruptcies at small state-managed firms and banks is another potential signal for reform.

A significant challenge will be finding a way to reform the hukou, China’s household registration system, to allow rural residents to get benefits such as education and healthcare when they move to cities.

If this is reformed China’s ongoing process of urbanisation, one of the greatest such projects humanity has ever seen, can continue.

For all this reform to happen the Bo issue needs to be resolved. While he is a truly great negotiator, it’s hard to see how he can talk his way out of his current situation.

On the high-speed train to Jinan to cover the trial, one is struck by the amount of construction going on. This does not look like an economy in slowdown, particularly around Tianjin, the coastal city not too far from Beijing that is gradually merging with the capital.

Shandong province, which is home to such big cities as Jinan and Qingdao, home of the famous Tsingtao beer, is expected to start trying to build its presence in the financial services market, since in June this year, Guo Shuqing, former chairman of China Securities Regulatory Commission, became governor of the province.

Powering ahead
“By the end of 2017, the added value of the Shandong financial sector hopes to exceed 5.5 per cent of GDP and be more than 12 per cent of the output value of the service industry,” the local government said in a statement.

The Shandong provincial government announced a guideline to improve financial reforms within five years, and also plans to build a modern market-
oriented financial system that can match the development of the “real economy”.

Local government should encourage more enterprises to go public and conduct strategic mergers and acquisitions, the document said. A financial centre in Jinan and a wealth management centre in Qingdao are expected to be built.