When the Finance Minister, Mr Pranab Mukherjee's was presenting the Budget, Premier Wen and other Chinese leaders outlined their Government's policies to the country's National Peoples' Congress. Wen indicated a slowdown in growth to 7.5 per cent, while significantly increasing Defence spending by 11.7 per cent to a record $106 billion and enhancing the Internal Security Budget by around 18 per cent.

China justified increased internal security spending on challenges posed by the Dalai Lama “clique” and “Islamic Separatists” in the Xinjiang Province, who have ties to militants in Pakistan. However, the troubles lie elsewhere.

The assertive Chinese are preparing the ground for major leadership changes later this year when President Hu Jintao, Prime Minister, Wen Jiabao, and a total of seven of the nine members of the Standing Committee of the Communist Party's Politburo, the apex decision making forum, will quietly move into retirement. Questions on the internal workings of the Communist Party of China have, however, become the focus of international attention, following the sacking of the charismatic Party Chief and Politburo Member of the Chongqing City, Bo Xilai, who appeared all set to become a Member of the Standing Committee.

The national leadership, apprehensive about the fallout of the Bo affair and the prospects of similar unconventional behaviour by other organised groups the Party, cracked down on potential opposition by organised groups like lawyers. While Bo's political ambitions to become a member of the Standing Committee of the Party's Politburo have been thwarted, his exit is a manifestation of inner party differences between the present leadership. One group wishes to proceed on the path of rapid economic growth, with minimal political changes on the one hand, while the other demands greater democratic freedoms and more inclusive economic growth.

The seemingly monolithic Chinese state structure faces an estimated 300,000 protests ever year. Moreover, there is increasing disaffection over the arbitrary exercise of state power and forcible seizure of land. Things boiled over to such an extent, that villagers in Wukan in the economically booming Guangdong Province drove out Communist Party officials.

Bowing to public outrage, the Communist Party eventually permitted the villagers to freely elect members of their village Council. China is now confronting the contradictions of having a capitalist economy with 300 million internet users on the one hand, and a secretive, non-transparent one Party political structure, on the other.

ABOUT BO

Like many others in the emerging, “fifth generation” Communist leadership, Bo is a “Princeling”, born in a politically influential family. China, like India seems to be headed for a period of dynastic leadership.

Bo's father, Bo Yibo was a veteran of the Communist Party and designated as one of its eight elders. During the purges of Mao's Cultural Revolution (1966-1976), Bo and his parents, like millions of others, were shamed and incarcerated. His mother was beaten to death, when in prison. With Mao's decline and death, Bo's father was rehabilitated and honoured by Deng Xiao Ping.

In these circumstances, one would have normally expected Bo to abhor Maoist practices. But, as he rose in the Party hierarchy, he evidently found that the Communist Party was losing its ideological moorings and even its legitimacy.

After he took over as Party Chief in Chonqing, Bo took a number of populist measures, cracking down on organised crime and corruption, providing housing for migrant workers and maintaining a remarkable growth rate, well above the national average.

But, where Bo ran into trouble, was in adopting Maoist ultra-leftist slogans like “sing red and strike back,” reminiscent of the Cultural Revolution. This ran counter to the views of not only Hu Jintao and Wen Jiabao, but also the views of the country's next ruler Xi Jinping, who has described the Cultural Revolution as an “illusion”.

To make matters worse, Bo's trusted Vice Mayor Wang Lijun, sought refuge in the American Consulate in nearby Chengdu, alleging corruption and persecution by Bo. Wang had to be persuaded to surrender and leave the Consulate. An outraged Wen Jiabao rebuked Bo, who was relieved of his duties as party Chief in Chonqing.

The Bo episode not only brought out the ideological and personal rifts in Beijing, but also brought into focus the lavish lifestyles of Communist Party apparatchiks and Bo's close links with the Americans. Bo's leftist rhetoric and populism have reportedly struck a responsive chord amongst leftist publications and websites.

GLOBAL RAMIFICATIONS

All this is occurring at a time of excessive “assertiveness” by China, on disputes over maritime and land borders with neighbours ranging from Japan, South Korea and Vietnam to the Philippines, Malaysia and India.

The People's Liberation Army is given to flexing its muscles and adopting a threatening posture. Any weakening of the political leadership will only lead to the Army seeking a greater role in national and international affairs.

(The author is former High Commissioner to Pakistan. blfeedback@thehindu.co.in )

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