Wednesday, June 21, 2006

Dear readers, I am currently in Beijing corrupting young minds about the Communist Party. Of course, I have been catching up with friends in the media based in Beijing as well. The result is what follows.

On the Liu Zhihua issue, a few more unconfirmed second-hand rumors/ observations

According to second-hand rumor, this is the first-step in Hu's attempt to finally attack the Shanghai fortress. Basically, if Liu is removed, Hu can make an argument that Shanghai is not singled out for corruption investigation. This would allow him to finally send an army of anti-corruption investigators to Shanghai, which is what you would need to topple the Shanghai city government.

The other second-hand rumor/observation is that given the sensitivity of Liu's job as the chief Olympics building czar, he must have been watched closely. So the fact that he got away with it for a while suggests that he has strong political backing. That is partly reasonable. True, Liu Zhihua enjoyed more rapid promotion under Jia Qinglin (when he served as mayor and PS from 1996-2002), suggesting some ties between the two. By extension, since Jia is a close allie of Jiang, Liu is in the Jiang network. However, anti-corruption in China is incredibly passive, and also corruption by its own nature is a hidden transaction. Currently, the only regular mechanism for monitoring corruption is an annual audit on one's family bank accounts, which is just laughable as an anti-corruption tool.

Other than that, you rely on petition letters (jubao xin) to tell you who is corrupt. The problem with jubaoxin is that they are often false, fabricated by the corrupt officials to get the clean officials in trouble, so the anti-corruption bureau takes all evidence with a large grain of salt. If enough evidence accumulates on a senior official (probably ting/ju level or above), then it gets sent to Zhongnanhai for discussion. This is where the political backing comes into play. Because of the unreliability of evidence, if a Standing Committee member vouches for someone, his colleagues will not lightly challenge that, or risk an all-out political war. After some reflection, I do think that the foreign origin of the accusation plays an important role, since Jia's political rivals (Hu) can say that the source of the accusation is now much more credible than the usual noise. Jia in this case would have a much harder time refuting the charge.

ANALYSIS - Beijing corruption case signals political battle
Wed Jun 21, 2006 12:39 PM IST

By Lindsay Beck

BEIJING (Reuters) - When Beijing vice-mayor Liu Zhihua was sacked for corruption it looked like a warning shot ahead of the Olympics, but analysts say his fall is as much about political jockeying as it is about bad morals.

With the 17th Party Congress -- one of the Communist Party's five-yearly meetings at which key leadership appointments are made -- little more than a year away, Liu's dismissal serves notice that the political game in China's secretive elite is heating up.

"It seems to be (President) Hu Jintao putting down one more marker on his way to the Party Congress," said Joseph Fewsmith, a Sinologist at Boston University.

Liu, who had controlled the $40 billion project to upgrade Beijing's infrastructure ahead of the 2008 Games, was taken into custody on suspicion of wrongdoings that a brief official report described this month as "quite serious".

His fall was no doubt a cautionary message for the myriad ministries involved in the Olympics, which China has promised would be open and clean. But with official corruption widespread, many are wondering: why Liu, and why now?

"Either he's very unlucky or there is a political motive behind it," said Victor Shih, a Chinese politics specialist at Northwestern University in Chicago.

Hu's predecessor, Jiang Zemin, toppled Beijing party chief Chen Xitong in 1995 on what critics say was a trumped up charge of corruption.

An estimated 17,000 candidates are to be rotated ahead of the next Party Congress, and with the government also downsizing party committees, some of them will lose their jobs.

"Now is when the (Party's) Organisation Department is vetting candidates for the next Central Committee, so Hu has to make a statement about who is in charge," Shih said, referring to the party's elite group which has 198 full and 158 alternate members.


Liu was seen as loosely aligned with Hu's predecessor Jiang Zemin, who still wields influence through political allies in his powerbase of Shanghai and whose proteges crowd the nine-member Politburo Standing Committee that is China's centre of power.

Hu made a high-profile inspection tour of Shanghai last week, adding to speculation he is in the midst of a political push.

He also chose a meeting of Shanghai's delegation to China's annual session of parliament in March to emphasise the need to "deepen reforms and broaden opening".

"We must unwaveringly support the direction of reform and have steadfast confidence and determination in reforms," he said at the time, comments he repeated on last week's tour.

The remarks hint at the policy differences between Hu and his rivals over what observers say is an ideological rift over the pace and direction of China's market reforms, which some factions argue are leaving too many behind and weakening the party's grip.

Ji Lin, another Beijing vice-mayor who has stepped into Liu's role as head of the 2008 Project Construction Headquarters Office, rose through the Communist Youth League, Hu's power base.

Hu's public stance in Shanghai and Liu's case also serve notice to the financial capital it may not forever receive favours like cheap credit and land approvals it did under Jiang.

"Certainly Jiang Zemin's faction is on the defensive," said Cheng Li, a China scholar at Hamilton College and a senior fellow at the Brookings Institution.

But while Liu's sacking might be the first salvo in the political tussle that is likely to gather pace as the Party Congress nears, analysts say a destabilising factional battle is unlikely.

"These two factions sometimes cooperate with each other and sometimes compete for power," said Li. "That pattern still largely remains unchanged."

Hi Victor. This Reuters article certainly fuels the fire:

China's Hu orders sacking of vice mayor - source

By Benjamin Kang Lim

BEIJING, June 22 (Reuters) - Chinese President Hu Jintao
ordered the sacking of a vice mayor at a secret meeting to
prevent political patrons from protecting him, a government
source said on Thursday, in a sign Hu was determined to fight

But many analysts said the fall of Beijing Vice Mayor Liu
Zhihua this month was as much about political posturing by Hu
ahead of a leadership reshuffle at a crucial five-yearly meeting
of the Communist Party next year as it was about corruption.

Liu, 57, responsible for urban planning and awarding $40
billion worth of projects to upgrade infrastructure ahead of the
2008 Olympic Games, was replaced by another vice mayor who rose
through the Communist Youth League, Hu's power base.

"Hu Jintao personally took charge of the case. He presided
over a three-day meeting and decided to take out Liu Zhihua," the
source who has close ties to Hu's camp told Reuters.

Liu is accused of corruption and bad morals and has been
sacked from the Beijing People's Congress, or city council, the
official Xinhua news agency said last week without elaborating.

"Beijing (government leaders) did not know about it
beforehand to prevent (them from) protecting him," said the
source who spoke on condition of anonymity.

But the source dismissed speculation Hu was jockeying for
power against his predecessor, Jiang Zemin, 79, who is keen to
have a say in the upcoming leadership reshuffle. Jiang also still
wields some influence through proteges in the party's nine-member
decision-making Politburo Standing Committee.

The cabinet spokesman's office and the Beijing city
government, reached by telephone, had no immediate comment.

The scandal has unsettled China's real estate industry, which
has been hit by a series of government measures to curb

Beijing Capital Co., a property affiliate of conglomerate
Capital Group, said in a statement in the Shanghai Securities
News on Thursday that group general manager Liu Xiaoguang was
cooperating with a government investigation surrounding the
disgraced vice mayor.

"At present, company operations are normal," the announcement
said without giving details. Capital Group is one of China's
biggest real estate developers with assets totalling 45.2 billion
yuan ($5.65 billion) as of the end of 2004.

It was unclear if the two Lius were related.

The party's graft busters took Liu Xiaoguang away for
questioning from the Beijing international airport on June 16,
the online edition of China Securities Journal said.

A company spokesman has denied the 51-year-old Liu Xiaoguang
was involved in any irregularities or crimes.

Shares in Beijing Capital, which were suspended on Wednesday
as news of the incident leaked out, were down 4.5 percent at 4.72
yuan in Shanghai at 0530 GMT.

Shares in Shenzhen-listed Super Shine Co., which is teaming
up with the group to develop a residential and commercial
property project in Beijing's Olympic Centre, had tumbled 5.1
percent to 5.38 yuan.

Capital Group is also the parent of Hong Kong-listed Beijing
Capital Land, whose shares remained suspended on Thursday. The
group has interests in real estate, water and gas supply, fund
management, trading and electronics.
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