China's debt-fuelled growth outlives fallen Bo

Fallen Chinese politician Bo Xilai may have been ritually consigned to political history at his trial this week but the country's leadership has yet to abandon the debt-fuelled economic policies he epitomised. Bo, who mounted a feisty defence at his five-day trial, won plaudits for his transformation of the southwestern megacity of Chongqing, where he became the city's top official in 2007, funded by billions in loans from state-controlled banks. His fingerprints are visible everywhere in the sprawling metropolis, from a new light rail system that snakes across its undulating hills, to more than 3,000 kilometres (1,900 miles) of motorways and 48 new bridges government documents say were built during his tenure. Chongqing's expansion began with China's "Develop the West" campaign to promote growth in the vast and relatively poorer region in the late 1990s. Bo's supercharged version of a growth model followed by cities across China -- funded by loans using land as collateral -- made it the country's joint-fastest-growing region in 2011, with an annual GDP rise of 16.4 percent, according to official statistics. The urban population of Chongqing swelled by more than 20 percent during his tenure, including many from rural areas who saw their land used to boost government income. But the growth came with dangerous risks in the form of massive debts incurred. Liabilities held by government financing vehicles in Chongqing swelled by 184 billion yuan ($30 billion) under Bo, according to an analysis by Dow Jones newswires -- around $1,000 for every man, woman and child in the municipality, which ranks among the biggest cities in the world. Bo's economic policy could be summarised as: "Take enormous amounts of money from the central government, you spend it, making your city a better place and making yourself a hero in the process," said James McGregor, chief of greater China operations for consultancy APCO Worldwide. Bo and Chongqing's government "went full-speed ahead on re-doing the city, which happened all over China -- and now they've got to figure out how to pay for it", he added. Spending included 34 million square metres (366 million square feet) of subsidised housing for Chongqing's poorer residents, part of populist policies Bo touted as an attempt to reduce the wealth disparities that have soared in China in recent decades. He matched them with Maoist-style rhetoric and actions, even sending thousands of officials to the countryside in an attempt to bring them closer to the masses -- but it was development that won plaudits from locals. "Bo demolished old houses and gave people new ones, which were bigger," middle-aged Chongqing resident Zhang Renliang said. "He had good connections -- he was able to make things happen." Bo's most controversial project was the huge Xiaonanhai dam on China's largest river, the Yangtze, which met with fierce opposition from environmentalists as it encroached on a reserve for many of the river's endangered fish species. "Without Bo Xilai pushing the project as he did, it wouldn't have occurred," said Weng Lida, former chief of the Yangtze Water Resources Protection Bureau, who had direct knowledge of the dam's planning. After years of planning, construction work started just as Bo was ousted and farmers living near the site said work had now paused, but they expect it to resume soon. Weng said that Chongqing's new leadership may yet decide to shelve the project, and locals say work on other high-cost projects, including a new showcase city district, has slowed. But Bo and China's new president Xi Jinping share a similar background as sons of prominent revolutionary leaders, and since being installed in March the head of state has launched campaigns with shades of those carried out by Bo in Chongqing. They include a "mass line" initiative -- Maoist terminology for the need to align the party with the people -- with citizens scandalised by regular reports of corruption among high and low level officials. As Bo did in Chongqing, Xi has used speeches to emphasise the importance of Maoist thought, and police nationwide have cracked down on political activists. Xi's administration has pledged to switch China's growth model to one driven by consumer spending rather than exports and infrastructure investment, but the latter is still rising at more than 20 percent a year, almost unchanged from when he took over. At the national level few major reforms have been announced, such as interest-rate liberalisation, which could weaken the flow of cheap credit to state-backed projects. "Chinese governments... are the world's largest property developers," Chen Gong, chairman of Beijing Anbound Information, a Chinese think-tank that advises local officials, told AFP, adding: "They build skyscrapers, town squares, roads and bridges, and amass huge amounts of debt." Some have touted a party plenum this autumn as a possible opportunity for reforms that could leave behind the Chongqing model followed by Bo. Nonetheless Chen said: "There will be some proposals, but it will just be a matter of slogans. I don't think leaders have a way to change, because of the huge power of special interest groups." McGregor added: "Economic reforms might not be as comprehensive as some would hope... there's still a lot of politics which have to be worked out."