Saturday, September 30, 2006

A colleague pointed out that on the 29th the Shanghai gang staged a "reunion" in a show of solidarity or--more likely-- to tell the world that the Shanghai gang is still here and powerful. Vice President Zeng Qinghong, Chair of CPPCC Jia Qinglin, Vice Premier Huang Ju, as well as Hua Jianmin, former private aid to Jiang Zemin all showed up. Huang Ju, for example, had nothing to do with the United Front portfolio and had no need to show up, but he did anyway. This was obviously a show of factional solidarity. It is interesting that a couple of former Zhu Rongji proteges, Wang Zhongyu and Sheng Huaren, also showed up. I am not sure what this means, but Zhu might not want to see the Shanghai powerbase completely dismantled.

全国政协办公厅等联合举行国庆招待会 贾庆林致辞 
2006年09月29日07:03 【字号 大 中 小】【留言】【论坛】【打印】【关闭】
9 月28日,全国政协办公厅、中共中央统战部、国务院港澳办、国务院侨办和国务院台办在北京人民大会堂宴会厅联合举行国庆招待会。中共中央政治局常委、全国政协主席贾庆林,中共中央政治局常委、国家副主席曾庆红,中共中央政治局常委、国务院副总理黄菊等出席。新华社记者 刘建生摄

  贾庆林致辞 曾庆红黄菊出席
新华社记者 刘建生摄

  新华社北京9月28日电 秋高好赋腾飞曲,国盛当扬奋进歌。28日晚,人民大会堂宴会厅张灯结彩,欢乐祥和,全国政协办公厅、中共中央统战部、国务院港澳办、国务院侨办和国务院台办在这里联合举行国庆招待会。中共中央政治局常委、全国政协主席贾庆林,中共中央政治局常委、国家副主席曾庆红,中共中央政治局常委、国务院副总理黄菊与来自香港和澳门特别行政区、台湾以及海外的新老朋友,首都各族各界的代表4000余人欢聚一堂,热烈庆祝中华人民共和国成立57周年。






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The saga continues; a wonderful piece by Chris Buckley and Ben Lim at Reuters. It makes sense that Jiang was consulted ahead on this move, which lends even more credence to the interpretation that Hu now has supremacy. Basically, Hu could afford to consult with Jiang since he knew that Jiang was nearly out of cards to play. Hu probably got his hands on some evidence on Jiang's family to force his hand.

China's Jiang blessed Shanghai corruption purge

By Chris Buckley and Benjamin Kang Lim
BEIJING, Sept 28 (Reuters) - Chinese President Hu Jintao won the
blessing of his predecessor, Jiang Zemin, before toppling the Communist
Party chief in Shanghai, Jiang's stronghold, sources said on Thursday as
a corruption probe in the city deepened.
Beijing party sources told Reuters that Jiang, now officially
retired, was consulted before Chen Liangyu was dismissed on Sunday, a
dramatic move that flagged Hu's determination to impose loyalty in the
nation's financial hub, which has strained against his uncertain
"Jiang wasn't ambushed, he was consulted," said an official familiar
with communications on the case. "Jiang wrote a comment that Chen
Liangyu should be sternly dealt with."
The official spoke on condition of anonymity. His comments were
confirmed by a source with ties to the leadership.
Chen was involved in channelling pension funds into illegal
investments and helped enrich crony companies and relatives, the party
announced on Monday. He was the first member of the Politburo, the party
leadership council, to be sacked since 1995 when Beijing party chief
Chen Xitong was purged and jailed. The two are not related.
Until now, Shanghai's commercial boom has been steered by a local
leadership closer to Jiang than Hu.
The two men have had cool relations, with Jiang wary that Hu has
dimmed his achievements and influence as the incumbent seeks to steer
China's development away from booming eastern cities, including
Shanghai, to poor inland regions, observers say.

But Jiang, 80, appears to have decided that he can best preserve his
remaining strength by approving Chen's downfall, even as he seeks to
protect proteges on the Standing Committee, the country's ruling inner
"Jiang wanted to protect Chen Liangyu. Hu did not object but
eventually changed his mind," said a third official, also with
leadership ties.
Jiang served as mayor and party chief of Shanghai for four years
until mid-1989, when he was elevated to national leader in the wake of
the bloody crackdown on the Tiananmen pro-democracy protests.
Many Shanghai officials who served under Jiang later moved onto the
national stage, where some have kept key positions to be able to act as
a counterweight to Hu, who took over from Jiang as party general
secretary in 2002 and state president in 2003.
"It seems there was a bargain between Jiang and Hu," Victor Shih, an
expert on Chinese politics at Northwestern University in Chicago, told
Reuters, adding that Hu wanted to make his authority unmistakable.
"With a Politburo member removed, everyone in the party knows Hu and
Wen mean business," said Shih, referring to Premier Wen Jiabao.
Jiang probably hopes to keep two Standing Committee members,
proteges Huang Ju and Jia Qinglin, in office until next year's party
congress, when Hu is likely to force Jiang-era holdovers into
retirement, Shih and other analysts said.
Shanghai officials confirmed on Thursday that Sun Luyi, director of
the Shanghai Party Committee's General Office -- the city leadership's
administrative engine -- was under investigation.
"The officials implicated in the Chen Liangyu case will not end at
this," said a mainland-controlled Hong Kong newspaper, Ta Kung Pao,
which reported Sun's case on Thursday.
Investigators have also questioned Shanghai's top policeman who is a
nephew of Jiang, and detained two relatives of the deposed Chen, sources
have told Reuters.
(Additional reporting by Jerker Hellstrom in Shanghai) ((Editing by
Brian Rhoads and Roger Crabb; Reuters Messaging: chris.buckley.
reuters.com@reuters.net; +86 10 6598-1261))

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Wednesday, September 27, 2006

Excellent new piece by Joe Kahn of New York Times. I think that even though Huang and Chen might have competed over spoils, Jiang mediated and protected them both, allowing both to earn substantial amounts. This piece provides further confirmation of Huang Ju's wife's involvement....

Shanghai's Party Leader, Mistrusted by Hu, Is Purged

Published: September 26, 2006

BEIJING, Sept. 25th As the storm clouds of a national anticorruption campaign loomed on the horizon last spring, Chen Liangyu, the Communist Party boss of Shanghai and one of China's most powerful officials, summoned reporters from the main state news agency to his office for a rare interview.

Mr. Chen told the reporters that, as chief of China's wealthy East Coast commercial center, he felt "obliged above all to carry out the orders of the party center," a public pledge of obeisance to President Hu Jintao.

That vow of fidelity came too late to rescue Mr. Chen. As an heir of the influential Shanghai-centered political machine built by Jiang Zemin, China's former top leader, Mr. Chen never won the trust of Mr. Hu, whose own power has grown steadily more formidable, party officials said.

On Sunday, security forces put Mr. Chen, 59, under a form of house arrest. The state news media reported Monday that he had lost his political posts, including his membership in the ruling Politburo, and that he might face criminal charges.

Such purges, common in Mao's time, rarely occur in today's China, which prizes political stability above all and does not generally let factional infighting spill into the public realm. Mr. Chen is the first member of the Politburo to be forced from power since 1995.

The action shows how determined Mr. Hu has become to break up entrenched local fiefs and to replace top officials who rose to prominence under Mr. Jiang with those who answer only to him.

It has also exposed the degree to which Shanghai, China's showcase commercial center, has become a political machine run by a small number of senior officials, who used political power to enrich themselves and their close associates, say people informed about the continuing investigation there.

These people, and all others interviewed for this article, spoke on the condition of anonymity, for fear of official reprisals.

Party investigators have looked into allegations of a diversion of Shanghai pension funds into real estate and infrastructure projects. Mr. Chen is suspected of aiding illegal business activity, shielding corrupt colleagues and abusing his position to benefit relatives, the official New China News Agency said.

"No matter who, no matter how high ranking, if they're violated party rules or the law, the investigation will be earnest and the punishment severe," the agency said in a report later read verbatim on China Central Television's main nightly news program.

Han Zheng, the mayor of Shanghai, was appointed acting party chief, the top position in the Shanghai region. But party officials said Mr. Hu would most likely replace Mr. Chen with an outsider of his choosing in coming weeks.

The instant the actions against Mr. Chen were announced, all traces of the newly disgraced leader disappeared from official Web sites. Some official photos of the Shanghai leadership were airbrushed to remove Mr. Chen.

Mr. Hu is seeking to reshuffle the Politburo and all major government and provincial posts at the 17th Party Congress, to be held next year, party officials say.

He has sought to sideline opponents before that event, where he also hopes to anoint his own successor, the officials say.

His crackdown on corruption, which has also resulted in the removal of lower-level officials in Beijing, Tianjin, Fujian and Hunan recently, is viewed by observers more as a political maneuver than as a genuine effort to fight graft. Corruption runs so deep in the ruling party that some officials acknowledged that at best it could be managed, not eliminated.

Mr. Chen became Shanghai party chief in 2002, the same year that Mr. Hu became general secretary of the nation's Communist Party.

They were on a collision course from the start, party officials say. Shanghai had been the political base of Mr. Jiang, who rose to prominence as party boss there in the 1980s and promoted many of his associates to top party and government posts when he became China's top leader in 1989.

As the new Shanghai boss, who controls great wealth and enjoys considerable autonomy in many policy matters, Mr. Chen became an important figure in Chinese politics, one who did not owe his rise to Mr. Hu. He joined the 24-man Politburo and, given his relatively young age, was widely viewed as a possible contender for higher positions.

Mr. Chen did not openly oppose Mr. Hu. While some China-watching pundits have speculated that Mr. Jiang's old Shanghai faction challenged the new senior leadership at every turn, it never operated like a cohesive political clique after Mr. Jiang's partial retirement in 2002, party officials say.

For example, officials who were thought loyal to Mr. Jiang were unable to help him much when Mr. Hu forced him to give up his final post, as head of the military, in 2004.Even within the faction, Mr. Chen had a rocky relationship with Huang Ju, another former Shanghai party boss who is now Mr. Chen's senior as a member of the nine-man Politburo Standing Committee, party officials said.Mr. Huang and Mr. Chen competed to control Shanghai's political appointments in recent years, the officials said, describing the contest as partly over how to divide the spoils of party-backed projects in the city.

Even so, Mr. Chen initially had enough clout to keep Mr. Hu's forces at bay. The city thrived on his watch. He oversaw its winning bid to be the host of the 2010 World Expo and helped attract tens of billions of dollars in foreign investment.

Shanghai now competes with Hong Kong, Tokyo and Singapore for the title of Asia's leading business center.

But it was also beset by scandal. In 2003, Mr. Chen survived a major investigation into the dealings of Zhou Zhengyi, a Shanghai-based property developer, who served a three-year jail term for fraud after he was accused of obtaining lucrative state loans and getting access to government-controlled land under false pretenses.

People informed about the current investigation say that Mr. Chen's younger brother, Chen Liangjun, a close associate of Mr. Zhou, was detained in recent weeks, and that officials reopened the file on that case to explore links to Chen Liangyu.

Last summer, Mr. Hu tried to oust Mr. Chen on the grounds that the Shanghai boss had ignored central government edicts to reduce speculative real estate investment and tamp down economic growth, people familiar with the investigation said.

Mr. Chen and his supporters rebuffed that attempt. But as one party official in Beijing put it at the time, "sooner or later Chen will fall."

Beginning early this year, Mr. Chen sought to display loyalty to Mr. Hu, accepting interviews with the state news media in which he emphasized his strong support for the leadership's policy initiatives.

But the investigation into his dealings had not ended in 2003, people informed about the matter said. By this summer, investigators had gathered evidence that several of Mr. Chen's closest aides, including his former secretary, Qin Yu, had overseen the diversion of locally controlled pension funds into a number of real estate and infrastructure projects.

Investigators are said to be examining the possibility that the main beneficiaries of those projects were local businessmen with close ties to Mr. Chen. At least half a dozen local officials and a similar number of businessmen have been detained on suspicion of misusing the pension funds.

If the allegations against Mr. Chen are true, the crackdown would appear to have singled out one of China's most corrupt officials. But party officials say Mr. Hu has yet to show that he intends to follow all the leads turned up in the Shanghai investigation.

People informed about the investigation said officials had also gathered ample evidence that Yu Huiwen, the wife of Mr. Huang, the Politburo committee member, and a major power broker in Shanghai in her own right, also had a role in the diversion of funds.

There has been no public action taken against Mr. Huang or his wife. Mr. Huang had surgery for a case of cancer and disappeared from public life for several months earlier this year. He has since made at least a partial recovery and resumed his duties, suggesting that he does not face an immediate political threat.

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According to the Taiwan based World Journal, two further Shanghai officials have been arrested: chair of the Law and Politics Committee Wu Zhiming and the head of the United Front Department Shen Hongguang. There is rumor that Wu Zhiming is a relative of Jiang Zemin's wife.





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Tuesday, September 26, 2006

And guess what appeared on the front page of the printed version of the People's Daily on the 27th? An article about Vice Premier Huang Ju and State Councilor Hua Jianmin. While the content is entirely meaningless, the fact that it appeared on the front page means that Huang and Hua are signaling to everyone that they are not in trouble. The article, I would argue, does not send such a strong signal about their political status. Everyone knows that Jiang loyalist Liu Yunshan controls the propaganda apparatus, so the appearance of such an article on the front page might just mean that Liu is doing Huang and Hua a favor, rather than that Huang and Hua are in the clear. If the PD was controlled by a Hu loyalist and such an article appeared, then I would say that Huang and Hua are in the clear. As it stands, the article does not say that Hu won't go after Huang and Hua, just that they are trying to convince everyone of that scenario.

  全国高技能人才工作会议暨第八届中华技能大奖和全国技术能手表彰大会召开 黄菊会见获奖代表并讲话

  新华社北京9月26日电 全国高技能人才工作会议暨第八届中华技能大奖和全国技术能手表彰大会26日在北京召开。中共中央政治局常委、国务院副总理黄菊亲切会见了高技能人才十大楷模、中华技能大奖获得者、全国技术能手代表和国家技能人才培育突出贡献奖获奖单位代表。国务委员兼国务院秘书长华建敏参加会见、出席大会并讲话。






《人民日报》 (2006-09-27 第01版)

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Total Rumor: the former party secretary of Guangxi and current vice chair of the environmental committee of the NPC Cao Bochun has committed suicide, presumably over corruption....still not sure if this one is true.

www.XINHUANET.com  来源: 新华网
【字体:大 中 小】 【背景色 杏仁黄 秋叶褐 胭脂红 芥末绿 天蓝 雪青 灰 银河白(默认色) 】

曹伯纯  第十届全国人大环境与资源保护委员会副主任委员。




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The Liberation Daily editorial on Chen's removal is pretty hilarious: "....(Chen's removal)fully expresses the center's trust and care of the Shanghai leadership group and the broad masses of Shanghai cadres...." The cadres at the Shanghai propaganda department are truly earning their pay today!





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Monday, September 25, 2006

So, here I was, going about my boring life, and BAM, we find out that Shanghai Party Secretary Chen Liangyu has been dismissed. This time, there would be no face-saving "illness" or "promotion" to the CPPCC. Like Chen Xitong before him, the Hu-Wen leadership is using Chen as a way to send a credible signal to all of the local officials about who is in charge. Chen will face criminal prosecution and go to jail. At this point, the official annoucement still does not accuse him of embezzlement personally, only that he facilitated and protected those around him who misused public funds. But the announcement suggests that the CDIC is just starting to investigate the case of Chen, so they might "find" more incriminating evidence, depending on the outcome of elite political bargain.

So now what? The main question of course is whether they will go after Huang Ju or his wife, who by many accounts is deeply involved in siphoning social security funds as the vice chair-woman of the Shanghai Charity Trust. I tend to agree with those who say that the bucks will stop at Chen Liangyu, but then I thought that it would stop at Qin Yu. There was a rumor from a few months ago about the disappearance of Huang Ju having more to do with his wife's corruption problems than with his own illness. Perhaps there is some truth to the matter. Perhaps the bargain between Jiang and Hu was that Huang Ju would stay in the Politburo Standing Committee until next fall while Chen Liangyu is sacrificed. Soon after Huang Ju's return from his "illness," the CDIC began to investigate the Shanghai case. There is some sign that Huang Ju is nervous though. Just two days before Chen's arrest, Huang attended a forum on social security, where he urged speedy building up of the social security system.......

Again, the question becomes who will replace Chen. Currently, Han Zheng is standing in for Chen as acting secretary. This choice is interesting since it suggests that Hu-Wen are comfortable with maintaining a key Shanghai cadre in power instead of rotating in a big fish from somewhere else (as was the case after Chen Xitong was dismissed). However, this might be temporary to calm the fears in the market, which so far is fairly stable. Over time, we will find out who the permanent replacement of Chen is in Shanghai. There is some chance that they have decided to keep Han Zheng, partly because he was known as a rival of Chen Liangyu and partly because Wu Bangguo probably spoke up on his behalf. If they are replacing the party secretary, some possibilities include Wang Zhaoguo, Liu Yandong, Wang Qishan, and Dai Xianglong (okay, very long shot). Beside these veteran figures, Hu might choose to take this opportunity to sneak one of his favorite underlings into the Politburo: Li Keqiang or Li Yuanchao.

People's Daily

2006年09月25日13:07 【字号 大 中 小】【留言】【论坛】【打印】【关闭】

  新华社北京9月25日电 9月24日,中共中央政治局召开会议,审议了中共中央纪律检查委员会《关于陈良宇同志有关问题初核情况的报告》。






Thanks for insightful commentary on Chen's arrest. It's a little surprising that Chen was removed, but mostly that it was so soon in the latest crackdown on corruption. There are rumors that he had significant ties to foreign firms. I'm hoping you can illucidate the impact that Chen's removal will have on foreign businesses. Are there any that would be particularly hard hit? The Shanghai stock market took a dip early this week, but will there be long term effects? Thanks for a great blog.
Do you see Western companies getting caught up in this?
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Tuesday, September 19, 2006

Dear Readers, I am currently making a final push on my book, which explains why there has been so few postings. To give you some food for thought, I am currently reading the Collected Works of Jiang Zemin, which has some truly fascinating selections. One such entry is Jiang's speech to the provincial leaders financial training course in 1999, which is in volume 2. In this speech, Jiang says "...some international opportunistic merchants (ie hedge funds) specialize in taking advantage of some weaknesses in some countries' economic system or policies to attack them....which causes grave harm to some countries or region and even threatens their soverignty or security." 294

I think this is still the predominant attitude at the highest level today, which explains why capital account liberalization is so slow and why Citigroup's joint-venture with Carlyle Group to acquire Guangdong Development Bank caused unease in the leadership.

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Monday, September 11, 2006

Meanwhile, Han Zheng tries desperately to distance himself from Chen's cronies. If Hu indeed wants to place one of his inexperienced followers as head of Shanghai, he or she will need Han Zheng. Unless.....a certain Mayor Dai is rotated to Shanghai....

上海市长韩正:切实加强廉政建设 严惩治腐败
2006年09月05日 来源:新华网

  沪宝山区长秦裕涉嫌严重违纪 2天前主持廉政会

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Maybe they will go after Chen Liangyu after all. Head of Xin Huangpu Group, Wu Minglie, was just arrested by the CDIC. The said company, which manages real estate and land in the prized Huangpu District, was founded while Chen Liangyu was head of Huangpu District. Wu had been the manager of real estate in the district when Chen was district head. Needless to say, the two must have quite a close relations. The company was accused of using extra-budgetary funds (EBF) against regulation. Basically, the State Council has out-lawed most extra budgetary funds, but for some reason money from land sale is still kept in EBF coffers. If this case is pursued thorougly, i.e. if it leads to the removal of Chen, the State Council and Hu-Wen will kill two birds with one stone. First, Hu of course consolidates power. Second, Wen can finally accomplish the aim of consolidating all of the government's income into the budgetary account, something that even Zhu had failed to do. Money from selling land is the last turf that the local government is defending, but it now seems the central government will have its way, especially if they see that not even Shanghai is immuned. The question then becomes: what will local officials "eat?" Well, you sell government positions of course.

Lianhe Zaobao of Singapore:


● 吴新慧(上海特派员)











It's a real good thing for anti-corruption. I do hope that China will become a real healthy country of legal system in practice as well as in theory i.e. system rule instead of man rule.
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Tuesday, September 05, 2006

Latest news from Singtao, with the arrest of Chen Liangyu's former secretary Qin Yu, the CDIC investigation team is preparing to leave Shanghai. Again, this suggests that they are not taking the case any further, but in any case, they have enough evidence to remove Chen (as in "promote" him to the NPC) for negligence. This will open the way for a Hu appointment to Shanghai. The evidence gathered by the CDIC team will also greatly weaken Huang Ju's position at the 17th Party Congress. With a lot of dirt on Huang and Jia Qingling, Jiang will have to mainly rely on Wu Bangguo and Zeng Qinghong to maintain the Shanghai faction, but I suspect that Hu is working on deals with those two similar to deals that Jiang made with Li Peng and Qiao Shi (ie if you retire, I will grant you one pick into the Standing Committee).

秦裕撤职 调查组仍留上海 社保基金案情恐升级
星岛环球网 www.singtaonet.com










a commentary that makes the same points
歐陽五﹕胡溫治滬 敲山震虎









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Some new development. According to pro-China TaKung Pao in Hong Kong, Huang Ju's wife Yu Huiwen made an appearance on the night of August 28th at a gala sponsored by the Shanghai Charity Foundation, where she holds the position of vice-chairman. Although this function was scheduled in advance, it shows that neither Huang or his wife is currently in trouble in the legal sense. This lends credence to the speculation that the arrests of a string of Shanghai officials were not intended to wipe out the Shanghai faction completely, as was the case with former Beijing mayor Chen Xitong. Nonetheless, these arrests have strongly signaled the decline of the Shanghai faction.

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