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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