Wednesday, July 14, 2004

Here is an interesting article sent by Matt Rudolph. As you can guess, I think
it rings true, but I am checking with Chinese sources. I must say that
in this fight, Hu-Wen haven't been totally "innocent" either. I mean
that they have no just "sit idly by" while Jiang and his cronies
attacked. First in May, Wen went after a steel company in Jiangsu and
the mayor Changzhou, which is the town neighboring Jiang's hometown.
Then, he had the National Audit Office audit a bunch of banks, provincial
governments and central agencies. In particular, the NAO issued a
stinging indictement against the Planning Commission, the power base of
Jiang crony and current vice Premier Zeng Peiyan. He also threatened
Jiang by auditing Netcom, where Jiang's son serves as CEO. Obviously,
Wen doesn't dare to actually expose Netcom, but the threat is there. In
this kind of fight, I think the faction with formal power (ie Hu-Wen)
will get the upper hand in this day and age. Jiang is no Deng. If Jiang
loses a major battle, the bandwagon will shift toward Hu-Wen's favor. If
there is a really hard landing, however, Wen might be in peril. However,
given his popularity in China, I think even Jiang would think twice
before removing Wen.

Leadership dispute over China growth
Premier Wen has heated debate with Shanghai party secretary over stringent
measures to cool economy
Straits Times 10 jul
by Leslie Fong

CRACKS are opening up within China's leadership over some administrative
measures put in place to cool the partially overheating economy.

Premier Wen Jiabao said measures to cool the overheating economy, like curbs
on sectors such as steel and real estate, were showing results. He said both
central and provincial governments must continue with them, though
refinements were permissible.

According to sources in Beijing, Premier Wen Jiabao is facing criticism from
within the ruling Chinese Communist Party's Politburo for choking off
economic growth.

Leading the charge against him is Shanghai party secretary Chen Liangyu, who
mounted a full-frontal attack against the premier at a recent Politburo

A source said that Premier Wen, who had been asked to give an update on the
economy, said measures like curbs on investment in sectors such as steel and
real estate were showing results.

He argued that both central and provincial governments must persist with
them though refinements were permissible if warranted by local conditions.

Mr Chen raised objections, saying these measures had hurt eastern provinces
like Jiangsu and Zhejiang badly and would retard overall economic growth in
the next few years.

He then presented his Politburo colleagues with reams of data on how these
measures would undermine Shanghai's growth specifically as well as a
compilation of adverse comments by foreign commentators on the prospects of
a soft landing for the Chinese economy.

He called for a re-think, adding, in what amounted to a warning, that
Premier Wen and his State Council, China's Cabinet, must take 'political
responsibility' for any damage done to the economy if they pressed ahead.


Shanghai party secretary Chen Liangyu said measures had hurt eastern
provinces badly and would retard overall growth. He offered data on how the
measures would undermine Shanghai's growth specifically as well as a
compilation of adverse comments by foreign commentators.

The source said the two then engaged in a long argument, with neither
conceding. In the end, Premier Wen said he was prepared to face the music if
the economy should nose-dive to a hard landing.

It was at this point that party leader Hu Jintao, who chaired the meeting,
intervened to say the administrative measures introduced were a collective

Government, at all levels, must carry them out resolutely, he ruled, as he
wound up proceedings.

The source said this was the most direct confrontation at the Politburo
level since Messrs Hu and Wen took over the reins of the party and
government in November 2002 and March last year, respectively.

It showed just how divisive the issue of reining in or moderating China's
recent explosive growth has become, with not just political leaders and
officials split into two camps but also economists and academics.

What makes the debate even more complex is a subtle power play between the
central government and regional authorities - and between the Hu-Wen camp
and those in the so-called 'Shanghai clique' led by strongman Jiang Zemin.

Indeed, China-watchers should not be surprised as tussles between Beijing
and local 'warlords' - national policies colliding with vested interests -
have long been a feature of Chinese politics.

Premier Wen's predecessor, Mr Zhu Rongji, determined to cool an overheating
economy in the mid-1990s, had to steamroller provincial detractors, leaving
them seething with resentment.

What was unusual in the latest episode was that Mr Chen, who is certainly
not the lone dissenting voice, chose to take Premier Wen on directly, and in
front of Mr Hu.

The speculation is that he had been emboldened by reports that just months
ago, Mr Jiang, who is Mr Hu's predecessor as party leader and still the
final arbiter on account of his control of the military, gave the permier a
hard time over the latter's management of the economy.

It is an open secret that the elderly leader has never been enamoured of the
Hu-Wen team. A source said in recent weeks that Mr Jiang had been hinting
darkly that a second five-year term for the two was not automatic.

It is also no secret that he often lent a willing ear to complaints about
them by provincial party chiefs and other vested interests within his
Shanghai clique.

But Premier Wen, a political survivor whose career has not suffered despite
his close association with ousted leader Zhao Ziyang, is no soft target

Since May, he has seized every opportunity to tell the world that the
Chinese economy is headed for orderly, sustainable growth - he did so during
his recent European tour and when receiving foreign leaders, including those
from Singapore.

He also told his officials to capitalise on every bit of favourable economic
data to signal that the measures were working.

And in a less than subtle reminder to detractors in the provinces, he had
the People's Daily, the party organ, publish four articles between May 19
and 25, exhorting every cadre to toe the official line.

Yet though Mr Hu ruled in his favour in the latest Politburo clash, and
minutes of the proceedings have circulated to all high-level officials, the
debate is far from over.

Only last week, Mr Xia Bin, a senior analyst in the State Council's
Development Research Centre, told the Financial Times that the
administrative measures were hurting productive enterprises.

China risked a painful hard landing if it persisted with these measures, he
said, adding that it should shift its focus to using monetary measures such
as an interest rate hike.

Doubtless what he reportedly said was music to the largely foreign chorus
urging the Chinese government to raise interest rates and revalue the yuan.

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