Chongqing has long been known as the "foggy capital" of China, an allusion to its humidity and its status as then-leader Chiang Kai-shek's base during the Japanese invasion. The fog has thickened since the March downfall of Bo Xilai, the former party secretary of the mountainous mega-municipality, and the frenzy of allegations about him and his family members. On Thursday, Bo's wife Gu Kailai will be tried for the murder of British businessman Neil Heywood; she will almost certainly be found guilty. As for Bo himself, his fate remains uncertain. When the fog clears, however, the real impact of this bizarre episode on China's future may become apparent.
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A unique set of economic and social policies the Bo administration adopted in Chongqing for the past four and half years -- widely known in China as the "Chongqing model" -- are a radical departure from mainstream state policy. In the aftermath of the Bo incident, the model is being discredited, especially the nostalgic "sing red" movement that organized massive public gatherings to sing revolutionary songs, and the heavy-handed "smash black" campaign against organized crime. Many elements of the Chongqing model, however, continue to be popular locally. It's important to understand why.
Until the late 1990s, Chongqing was as an economic backwater. China's once-proud wartime capital could celebrate little other than its food -- arguably the best and spiciest in the country. In 2000, when Beijing launched its "Go West" strategy, Chongqing became the beachhead for efforts to develop China's vast western provinces. Yet it still lagged far behind China's three other centrally managed municipalities, the economic powerhouses Beijing, Shanghai, and Tianjin. It was the policy innovations under the administration Bo, the party secretary, and Mayor Huang Qifan that fundamentally transformed the city.
To understand the uniqueness of the Chongqing model, it is useful to look at China's growth pattern since 2000. While impressive in its pace, critics have labeled China's recent growth pattern "Guo Jin Min Tui," roughly translatable as "the interests of the state advance while those of the private sector and the people retreat." China maintained a state-directed economic model that put exports and investment before living standards.
In 2011, among China's 500 largest companies, state-owned enterprises (SOEs) accounted for more than 90 percent of the total assets and 85 percent of revenues. Between 1983 and 2010, wages fell from 56.5 percent of gross domestic product to 36.7 percent. The government has set interest rates at low levels that punish Chinese savers, while state-owned banks posted record profits of $161 billion in 2011. While the Chinese economy since 2000 has grown at roughly 10 percent a year, the quality of life for Chinese households has improved much more slowly.
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