Mao Zedong's words may inspire a new breed of cadre but staunch Maoists are not so sure, writes John Garnaut.

Last week, the good-looking, charismatic and Western-savvy Communist Party chief of Chongqing municipality led his local cadres in a thumping recital of old-time revolution songs. The cadres sang awkwardly from their little red song books, as the TV cameras rolled, but their leader, Bo Xilai, knew the words by heart.

Bo kicked off with Revolutionaries are Always Young and segued into other Communist favourites, with improvised introductions about his favourite lines. "Chairman Mao said the world is yours, and is also ours. But in the end it's yours "

Bo liked that particular line so much he messaged a version of it to those of Chongqing's 31 million citizens who had mobile phones, which these days is most of them. Recipients reportedly liked the lyric so much they forwarded it 17 million times.

Then Bo produced two statues, recognisable to all veterans of the old Chinese propaganda system, of the model cadre Jiao Yulu and the model worker Wang "Iron Man" Jinxi.

"I hope Chongqing could produce more cadres like Jiao Yulu and Wang Jinxi," said Bo, echoing the words of Chairman Mao in the early Cultural Revolution days.

"All district and county chiefs should be like Iron Man Wang: fearing no hardship and sacrifice; preparing to rush forward at the moment of truth," said Bo.

This burst of revolutionary nostalgia has not been confined to Bo Xilai's Chongqing. In April, Xi Jinping, the presumed next president, marked the run-up to tomb-sweeping day by visiting the memorial hall of model worker Jiao Yulu. Xi called Jiao "the guiding spirit" of China's grassroots cadres.

President Hu Jintao has also been caught in the outbreak of red fever. His National Day speech on October 1 was crammed with references to Mao. "Long live Mao Zedong thought," read a huge red banner beneath a house-sized portrait of the Great Helmsman that drove past an applauding Politburo on Chang'An Avenue.

In December, the Xinhua news agency awkwardly labelled Hu's tribute to 30 years of economic reform as a "reform eulogy".

Fan Jinggang, who runs a Beijing bookshop called Utopia and a prominent website of the same name, laments that the recent red fervour is superficial and there have been no "real" socialist leaders since the chairman died in 1976.

"The past 10 years has seen ultra-rightist reform and there has been no remarkable achievements by socialist reformers," says Fan.

But perhaps Fan is being too modest. The past year has also seen the state tighten its grip on the political sphere and increase its reach in the economy.

This week's edition of China Newsweek reports that there are major economic reforms in progress - it just depends on your definition. The magazine went to the entrepreneurial heartland of Taizhou, Zhejiang province, where officials told of the ambitious "shareholder reform" of Taizhou's top 100 private companies. For most of the past 30 years, shareholder reform has meant privatising schlerotic state-owned companies. This year, in Taizhou, it's the other way around.

"In the coming five years, Taizhou's state-owned enterprises will grow their share of the economy from 2 per cent to 30 per cent," said Zhang Ruimin, in charge of the area's economic reform program.

To some extent, Taizhou's "reforms" mirror what is taking place across the world. The city's export manufacturers (including the world's biggest sewing-machine maker) were hit badly by the export downturn and the Government instructed state-owned banks to bail them out. It is logical that the Chinese Government wants an ownership share in the businesses it assisted, although it is also targeting firms that needed no help.

Elsewhere in China, there is talk about industry nationalisation without any obvious link to the global economic crisis. The private coalmines of Shanxi province produce about as much coal each year as the whole of Australia. Shanxi's governor Wang Jun has said he is committed to nationalising almost all of them, citing safety concerns.

Angry Shanxi coal bosses told the Herald that safety was merely a fig leaf for provincial government officials to give even greater powers to themselves and pay off their mates in state-owned enterprises.

''Whether you merge is not up to you it's totally forced under threat of closure,'' said one coal boss, who said he would receive 50 million yuan in compensation for an asset that was worth 600 million yuan.

''State-owned enterprises are raping private enterprise,'' said a local official and businessmen, who buys coal but does not produce it.

The official, who has a seat on the Taiyuan City People's Congress, said he had been in a private meeting where the governor had advocated ''guo jin min tui'' - which means ''advance of the state and retreat of private enterprise''.

This week's Hurun Rich List appeared to corroborate the view that the state is increasingly dictating who in China will make money, and who will not. Seven of last year's top 10 have tumbled out of the charts.

Two of last year's leaders, including the richest man, Huang Guangyu, have spent the year in detention without charge following investigations into financial irregularities.

Last year's No. 2, Du Shuanghua, has hurtled to 39th place after the Shandong provincial government decided to buy his Rizhao Steel operations at a fraction of the market price. Du appears to be getting little say in the matter.

Another steel maker, Zhang Zhixiang, had plunged from 10 to 31 after mafia groups connected with a rusty state-owned company called Tonghua Steel foiled his bid to take it over - by throwing Zhang's right-hand man out of his office building and to his death.

But the same Hurun list shows the pile of Chinese US-dollar billionaires has grown from 3 to 130 in just five years. State intervention may be "churning" but not reversing the rise of China's private sector.

Chen Naixing, the director of the Small and Medium Enterprise Research Centre at the Chinese Academy of Social Sciences, says liberalising reform is slowing but not retreating.

"Yes, of course, you get slower as you climb higher," says Chen. "Because you encounter more difficult problems."

Fan says "it's too early to say nationalisation is making a comeback".

But Anne Stevenson-Yang, who manages the Asia division of a US equities research firm called Wedge Partners, says she is seeing evidence of a "power grab" by the Chinese state taking place in coal, iron ore importing and mining, steel and a host of other industries.

"We are in the middle of a massive recentralisation of power that is going to be seriously detrimental to the economy," she says. Most worrying, she says, is the ever-increasing presence of China's public and state security apparatus in the Chinese economy. "This is ultimately engendering protection rackets, extortion and bribery on a destabilising scale," she says. Some architects of China's economic reforms appear to share these views.

Zhu Rongji was the premier who reformed China's state-owned companies in the 1990s and steered China into the World Trade Organisation. He has studiously kept a low profile since retiring in 2002 until last month, when he released a carefully edited collection of his press conferences.

"In the war against corruption, we should beat the tiger before beating the wolves," said Zhu, in one of his memorable interviews.

"As for the tiger, we should never show mercy. Let us prepare one hundred coffins, including one for me."

For some Chinese readers it was revelatory to learn how a Chinese leader could be grilled on the toughest political questions by foreign journalists and handle them with ease and good humour. The book immediately jumped to the top of China's best-seller charts. Whatever Zhu's intentions, it is being interpreted as an eloquent and dignified protest at the reversal in China's path towards openness and economic reform.

"Zhu was in a class of his own," wrote blogger Jia Junjun on the sina.com.cn website.

"His courage, his close interaction with the common people, his incorruptibility, his self-composure in front of the public, his steadfast managerial style and his lack of mercy for corrupt and mediocre officials - all of these [characteristics] regrettably do not belong to this age."

A close acquaintance of Zhu's says it is no coincidence Zhu's most important economic adviser, Wu Jinglian, was also emerging from obscurity in the lead-up to China's 60th birthday party on October 1.

"I'm not optimistic about the future," Wu told The New York Times in a rare interview. "The Maoists want to go back to central planning and the cronies want to get richer."

Wu knows more than a little about China's crony capitalists, who may have been behind rumours in the official press that Wu was being investigated for subversion. He also knows about the new-age Maoists, who habitually vilify him on websites such as Utopia.

"If reform were completely achieved in accordance with collaborator Wu Jinglian's neo-liberal trash, we couldn't imagine how miserable China would be today," read one of the less-profane essays on the Utopia website, by contributor Shen Shuigen.

China's new left has emerged in response to the harsher edge of China's breakneck economic rise: inequality, corruption and a perceived ideological and moral vacuum. Recently, the rise of the new left has been accelerated by China's spectacular emergence from the global financial crisis. For many, including in the top leadership, it proved that China's "model" of tight capital controls and pervasive state intervention in the economy was superior to those of the West.

Economic liberals such as Wu Jinglian and Zhu Rongji believe state controls are making China's problems worse because they exacerbate China's economic imbalances and magnify opportunities for crony capitalism. Those who browse the bookshelves and websites such as Utopia tend to believe the opposite is true.

It is perhaps ironic that China's revival of revolutionary nostalgia is now being led by Chongqing's Party chief, Bo Xilai. Bo was previously China's minister of commerce and knows how the wheels of global capitalism turn. He saw that the more power that his Commerce Department bureaucrats obtained, the worse their corruption scandals grew.

Bo's conversion to Maoist symbolism is stranger still when you consider that his own father, who was one of the Eight Elders of the Chinese Communist Party, was imprisoned and tortured for a decade during Chairman Mao's Cultural Revolution. Bo Xilai escaped with being imprisoned for five years from the age of 17. But his mother was beaten to death.

Perhaps Bo Xilai is gambling that he can harness his considerable charisma, courage and revolutionary pedigree to vault over his colourless rivals to the top of the Chinese Communist Party. Bo might be an unelected cadre who has brutal experience with the underside to Mao's revolutionary fervour, but he's betting that he knows what the masses want.

with Sanghee Liu