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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