Chinese Character

The ‘champagne Maoist’

Fall of Bo Xilai clan also drags down billionaire boss of Dalian Shide

The ‘champagne Maoist’

Bo and his wife Gu Kailai

Bo Guagua has a reputation for being a bit of a party animal. Last year the Harvard student made headlines when he drove Jon Huntsman’s daughter to dinner in a Ferrari. And while studying at Oxford, photos of Bo at a ball made it online, featuring the undergraduate with his arms around two willowy blondes.

But the party could well be over for Bo junior – as it almost certainly is for his father and mother.

Xinhua announced this week that Bo Xilai – the once-powerful Party boss of Chongqing – has been stripped of his place on the 25 person Politburo due to “suspected serious violations of discipline”.

That’s normally code for corruption.

His wife, Gu Kailai – the daughter of a famed Chinese general – has also been detained. She has been “transferred to judicial authorities” for her suspected role in the murder of Briton, Neil Heywood, who died in Chongqing last November.

Heywood has been referred to by the foreign press as the “consigliere” of the Bo clan, helping them to fix meetings and manage their overseas assets. He is also suspected to have been poisoned after a falling out with Gu, says the Wall Street Journal. Last weekend, the newspaper published an investigative article detailing Heywood’s role in Gu’s web of business interest “spanning China, the US and Britain”.

The fall of Bo is the biggest political event to rock China in decades. He is the son of Bo Yibo, one of the so-called ‘eight immortals’ of the ruling Party – a lineage that places him firmly in the Communist aristocracy. Until recently (see WiC142) he was tipped to get a place on the nine member Standing Committee, the powerful body that effectively governs China, and which will be reshuffled later this year.

But his political career is now over.

The People’s Daily, the Party’s flagship newspaper, released a damning editorial on Tuesday. “Bo Xilai’s conduct has seriously violated the Party’s disciplinary rules,” it proclaimed, “damaging the affairs of the Party and the country, and badly harming the image of the Party and the country. There are no citizens who are privileged before the law, and the Party does not allow privileged members who stand above the law.”

Bo’s purging is a blow to the ‘leftist’ wing of the Party, which has been tussling for power with the reformist faction. Last June WiC detailed this split (see issue 113) and advised foreign CEOs to keep an eye on it. In recent months the reformists have looked to be in the ascendant (see WiC140).

While few predicted the charismatic Bo’s fall, the manner in which he was finally toppled largely went to script.

Last December we used the ouster of a corrupt Shandong official to detail the techniques often used to hobble opponents. “Beat the dog and watch its owner” is a proverb that we quoted to describe the tactic used to topple kingpins, i.e. attack their underlings first (see WiC131). The arrest of Bo’s right-hand man Wang Lijun in February was a precursor to taking down the boss himself, fundamentally weakening his prestige and powerbase (see WiC138).

Then again, the exact details of Bo’s dramatic ousting may forever remain a mystery. As historian Jonathan Fenby put it in a New York Times op-ed: “The dust hasn’t settled on the dramatic Bo Xilai affair. Indeed, it may never fully do so despite a report from Beijing that the Communist Party has decided to suspend him and that his wife is in detention. It is 41 years since a previous shooting star of Chinese politics, Mao’s anointed successor, Lin Biao, died in a plane crash after apparently attempting a coup, and we still do not know exactly what happened.”

The events of recent weeks further recall another chapter of Chinese history: the fall of the Gang of Four in 1976. In both cases leftists were outflanked and toppled by the reform faction (see page 18 for more on the fall of the ‘left’). Indeed, the parallels were hinted at unmistakeably during Premier Wen Jiabao’s closing press conference at the National People’s Congress in March. He urged there be no repeat of “the mistakes of the Cultural Revolution”; the period of political insanity fomented by the Gang of Four and Mao Zedong. At the time this was interpreted as an attack on Bo and his Maoist campaigns to get Chongqingers to sing ‘red’ songs from the revolutionary era.

In truth, Bo’s family’s business dealings leave him looking an unlikely leftist. If anything, future revelations are likely to expose him as more of a champagne Maoist. Certainly there was always a certain dissonance between his red rhetoric and the fact that he sent his son, Guagua, to be educated at Harrow, Oxford and Harvard.

How that was paid for was also a puzzle, especially by a man on a government salary. At a press conference last month, Bo claimed his son had won scholarships (at the same event he also said that his wife had sacrificed her career for the sake of his own and “just does some housework for me”).

That comment turns out to look pretty implausible, given what we are starting to discover about her secret business empire. The Chinese media has also speculated that Guagua’s expensive education was funded by Xu Ming, the tycoon who owns Dalian Shide.

Indeed, another interesting aspect of Bo’s fall is what it demonstrates about patronage networks in China, and how quickly they can unravel. We have written before about the importance for Chinese businesspeople of connections, a concept known locally as guanxi (see WiC120) and political endorsement can prove a vital part of such networks.

Dalian Shide, for example, was founded in 1992, the same year that Bo became the city’s mayor. Xu’s chemicals and building materials business flourished in the ensuing years, both in Dalian and across Liaoning (of which Bo became provincial governor in 2001). Xu’s conglomerate would end up seeing him worth Rmb13 billion, according to the Hurun Rich List.

But Bo’s power peaked last year, and so too, it seems, did Xu’s.

Bo was sacked as Chongqing Party Secretary on March 15. On the same day Xu was arrested for “economic crimes”, according to The Economy and Nation Weekly, a publication affiliated to Xinhua.

Xu’s company is now faced with “a life-or-death battle”, the newspaper says, with state-owned China Construction Bank reported to have called in its loans to Shide.

The 21CN Business Herald also reckons Xu’s fortune was built on his relationship with Bo. His big break came in 1996 when Bo ordered that 175 residential areas in Dalian must switch their window frames to the type made by a firm that Xu owned. He would use this opportunity to go on to become the world’s biggest maker of PVC metal windows and doors.

Hong Kong-based Apple Daily comments: “Xu is not only a famous rich man, relying on Bo’s support, but he is also accused of backing Bo’s family: Bo’s wife made huge money in Dalian by virtue of Xu; Bo’s son is accused of relying on Xu’s funding to study overseas.”

Coincidentally, the China Times reported this week that Guagua may have returned to China from the US. It speculates that Bo’s “playboy son” might have come back because the funds used to pay for his studies at the Harvard Kennedy School have already dried up.

With Xu behind bars, that might not be such a surprise.

Keeping track: according to the US State Department, Bo Guagua is still in America and studying at Harvard University. In an unusual move the US government confirmed Bo’s academic status on April 19. It did so to counter rumours Bo had halted his studies and returned to China. The New York Times also reports that Bo did not drive Ms Huntsman to dinner in a red Ferrari, as had first been reported in the Wall Street Journal.

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