By Shujie Yao.

The sudden dismissal of Bo Xilai as party chief of Chongqing Municipality on Thursday was a shock in China and for western business. It will not mean an end to economic reform or China’s open-door policies. But it will stop political reform in its tracks and encourage collusion between local government and business.

Bo had been a champion of social justice and the fight against organised crime involving government officials in Chongqing.

He took Wang Lijun from Liaoning to take charge of the Chongqing Police Bureau in 2008. Wang launched a reckless battle against his predecessor Wen Qian, hundreds of other local officials, many businessmen and others who were suspected of involvement in organised crime. In less than three years, Wen Qian, many corrupt officials and some rich businessmen were sentenced to death. Hundreds more were imprisoned.

In the meantime, Bo launched a campaign to persuade Chongqing’s citizens to sing ‘red songs’ that were popular during Mao’s time, invoking Mao’s spirit and social justice to reduce corruption.

Under Bo’s leadership, various policies were implemented to improve living conditions and infrastructure in Chongqing. Other reforms were brought in to accelerate urbanisation, reduce poverty, integrate rural migrants into city life, and build low-rent housing for the poor and low income households, and so on.

Economic growth has been significantly faster than in the rest of the country and Chongquing’s achievements have been praised as the ‘Chongqing Model’, regarded as superior to the ‘China Model’.

Bo must have made many enemies over the years. The unexpected defection of Wang Lijun, his hand-picked political ally, to the US Consulate in Chengdu on February 8 must have been a vital blow to his political future. Now he has gone.

In China, this means that any meaningful political reform is on hold. The next generation of leaders will follow the tradition of stability and harmony and tolerate a high degree of corruption and state monopoly.

For western business, the removal of Bo may mean little. It could be seen as a threat to their ability to benefit from China’s open-door and economic reform policies. But such concerns may not be necessary because openness and economic reform are common objectives of all the party and state leaders.

Bo’s dismissal can be considered as a pure political fight. His removal will not and cannot change China’s course of reforms. To maintain stability and harmony, some sacrifices, including big sacrifices, have to be made. Bo is such a big sacrifice. The vast majority of high level politicians were not prepared to be challenged or threatened by him, were he to become a top leader after the 18th Party Congress later this year.

Vested interests will be cemented by Bo’s departure. Corruption and social inequality in China may get worse for a long time before getting better. Few politicians will dare to do anything similar to what was tried out in Chongqing. This is not a win-lose game between the left and the right. Nor is it a win-lose game between reformers and conservatives.

Another possible outcome is that local governments will engage more closely with business and ‘organised’ activities will become more visible for the coming decade. Foreign investors may be able to enjoy more government support. But they should be aware that business-political collusion will have to be controlled sooner or later.

Shujie Yao is Senior Fellow in the China Policy Institute, and professor and head of the School of Contemporary Chinese Studies at the University of Nottingham.

This article was firstly published in The Financial Times under the title of  ‘the fall of Bo Xilai and the implications for foreign business’  on Friday 16 March 2012.