What happened in China on Tuesday? The coup that never was

Late on Tuesday afternoon I began to receive links to financial sector blogs which said that a coup was happening in China.

In one sense this was unsurprising, since bankers, hedgefunders and the like keep a very close eye on what is happening. A few hours later there were shudders in the relationship of the Japanese Yen to the US$, and indications of movements in secondary currencies.

The coup rumour claimed that large numbers of police were occupying certain squares in Beijing. There were reports of armoured vehicles on the move.

In fact, the massing of police seems to have been to guard a departing North Korean delegation. So no coup then?

Well, yes and no.

Outgoing: Chinese Premier Wen Jiabao (left) and Chinese President Hu Jintao

Outgoing: Chinese Premier Wen Jiabao (left) and Chinese President Hu Jintao

Every 10 years the Chinese Communist Party seeks to effect an orderly transition in which one lot of bottle-black middle-aged men replace a slightly older lot. The time has come for President Hu Jintao and Premier Wen Jiabao to step aside. This means changes in the 24 man Communist Party Politburo, and - crucially - its nine man Standing Committee, the body which really rules China.

The Party likes to ensure that these changes seem orderly and seamless. In fact, this time we have rare glimpses of real tensions within the ruling group. These are as much about policy as personalities, because within the seemingly monolithic Party there are real differences over future strategy.

Differences may not be aired in public in the National Peoples Congress which met last week, but huge thinktanks, employing thousands of experts, represent rival views: should the country focus on unimpeded growth, or should it start creating a rudimentary social security net? Above all, should there be a move to managed democracy, to satisfy the demands of a burgeoning middle class for more personal freedoms?

Peasants are unhappy about speculative land grabs for rapid development, and others are exercised about where nuclear power plants are built or that high speed trains can crash. The railway minister was purged after it emerged that he was on top of a £100 million network of bribery and corruption, which had helped him maintain 18 mistresses.

One man who seemed on the up, Bo Xilai the mayor of Chonging municipality, is suddenly nowhere to be seen. He thought he was about to join the nine man Standing Committee, until Wang Lijun, his police chief, 'defected' for several hours to the US consulate, claiming that Bo had tried to kill an investigation into corrupt practices by Bo and his family.

Mr Bo comes from a distinguished political dynasty. His father was Finance Minister and a close associate of Chairman Mao. His Oxford-educated son was rumoured to drive a Ferrari. Mr Wang has since been spirited away by the state security police.

Wen Jiabao uttered dark warnings about those seeking to go back to the hysteria and violence of the Cultural Revolution. He meant Mr Bo, in whose fiefdom there were alarming revolutionary 'singalongs' (in restaurants) and much display of Red imagery. Businessmen had been violently purged. What Wen did not like was that these policies were overly identified with Mr Bo's personal charisma - a black mark in a country where the leaders are anonymous managers and technocrats. 'Playing the crowd' and 'seeking fame and fortune' are no substitute for calm collective decision-making.

Bo Xilai, the mayor of Chonging municipality, was expected to join China's powerful Standing Committee, but has now been spirited away by the state security police

Bo Xilai, the mayor of Chonging municipality, was expected to join China's powerful Standing Committee, but has now been spirited away by the state security police

So Mr Bo fell foul of the tall poppy syndrome, by being too energetic and flashy. There may have been no 'coup' (a word just banned from the Internet in China) but we have had a peek behind the thick curtain hiding the inner mysteries of Party power.

China's ruling elite may like to give the impression of stability, and of political change working at glacial speed, but this is hard to square with an incredibly dynamic economy and society, which constantly threatens to burst through the Party straitjacket.

Since we are talking about the second largest economy in the world, the largest manufacturer and exporter, and most likely the world's superpower in 20 years, these obscure rivalries really matter, even if they do not amount to a coup.

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