UPDATE 1-Supporters of China's disgraced Bo Xilai set up political party

Benjamin Kang Lim and Ben Blanchard
Saturday, 9 Nov 2013 | 6:01 AM ET

(Recasts, adds more comments from Wang, details)

BEIJING, Nov 9 (Reuters) - Supporters of China's disgraced senior politician Bo Xilai, who has been jailed for corruption, have set up a political party, two separate sources said, in a direct challenge to the ruling Communist Party's de facto ban on new political groups.

The Zhi Xian Party, literally "the constitution is the supreme authority" party, was formed on Nov. 6, three days before the opening of a key conclave of top Communist Party leaders to discuss much-needed economic reforms, the sources said.

It named Bo as "chairman for life", Wang Zheng, one of the party's founders and an associate professor of international trade at the Beijing Institute of Economics and Management, told Reuters by telephone.

"This is not illegal under Chinese law. It is legal and reasonable," Wang said.

A second source, who asked not to be identified but who has direct knowledge of the party's founding, confirmed the news.

Calls to the Communist Party's propaganda department seeking comment went unanswered.

The party announced its establishment by sending letters to the Communist Party, China's eight other political parties, parliament and the top advisory body to parliament, Wang said, adding that no ceremony was held.

It also sent a letter to Bo via the warden of his prison informing him that he would be their "chairman for life", she said. It was not immediately clear if Bo would agree.

The party was set up because it "fully agrees with Mr Bo Xilai's common prosperity" policy, according to a party document seen by Reuters, a reference to Bo's leftist egalitarian policies that won him so many supporters.

Asked if party members included Communists, government officials or People's Liberation Army officers, Wang said she could not discuss the matter to protect them because it was politically "sensitive".

China's constitution guarantees freedom of association, along with freedom of speech and assembly, but all are banned in practice. The constitution does not explicitly allow or ban the establishment of political parties.

Bo, once a rising star in China's leadership circles who had cultivated a following through his populist, quasi-Maoist policies, was jailed for life in September on charges of corruption and abuse of power after a dramatic fall from grace that shook the Communist Party.

History suggests the Communist Party will not look kindly on the establishment of this new party, even more so because its titular head is a former member of its own top ranks.

China's Communist rulers have held an iron grip on power since the 1949 revolution, though they allow the existence of eight government-sanctioned non-Communist parties, whose role is technically to advise rather than serve as a functioning opposition.

The Communist Party views the founding of opposition parties as subversion.

Activists have been jailed in the past for setting up political parties, but parties have never before coalesced around fallen top political leaders.

One of China's most prominent dissidents, Xu Wenli, was sentenced to 13 years in prison in 1998 for helping to organise an opposition party, the China Democracy Party.

Xu and other activists set up the party that year, but the government took a dim view and by 2000 Beijing had effectively crushed the nascent movement and locked up its founders and members.

Xu was forced into exile in the United States in December 2002.

Asked if she was worried she would be arrested, Wang said: "We are not afraid. I don't think we will be arrested. Our actions are legal and reasonable."

Bo is imprisoned at the Qincheng penitentiary, just north of Beijing, where fallen members of the elite are incarcerated.

He was expelled from the Communist Party last year ahead of his trial.

Many of his supporters viewed his fall and the trial as a political plot against him, rather than the consequence of any wrongdoing.

(Editing by Neil Fullick)