Elite Chinese Politics and Political Economy

This supposed Xinhua-compilated internal material on the views of Chen Liangyu has been circulating on the web. I am not vouching for its authenticity, but it strikes me that it is possibly real. To discredit senior leaders, the CCP often put out internal circulars outlining the "thoughts" of the target. This delegitimizes the person in the eyes of the entire party and serves as an example of what views are wrong. Note, a lot of the views expressed by Chen Liangyu were simply classic Dengist-Jiangist thoughts focusing on economic growth. By issuing this document--if it is real-- the party is clearly signaling a turn toward more socialist policies.

Xinhua News Agency Internal Reference Material: Selected Views of Chen Liangyu
(Part I)
1. On the Communist Party
- What's most important at the moment isn't for the Communist Party to worry that it will collapse. The Communist Party doesn't need to keep on worrying whether or not it will collapse. The Communist Party works for sake of the people's interests. What the Communist Party should worry about most, for the sake of the people, is whether or not the country can hold up its head in international competition - and allow the people to hold up their heads, and allow overseas Chinese, and Chinese around the world, to hold up their heads. - Marxism is a science. Mathematics, physics, chemistry, economics, management, and psychology are also sciences. My party has to respect science when making policy decisions, and that means respecting all sciences. - Our party needs professional talent, and our [Central] Party School has to train professional talent. That is, it has to cultivate personnel with specialized know-how who can give play to the leadership of the party in professional posts. The party School is not a place for learning central documents and policies and taking votes, nor is it a place for forming gangs and factions to struggle over ideology.
2. On Shanghai
- The "Three Represents" requires that the Chinese Communist Party represent the development of China's advanced productive forces, the orientations of advanced Chinese culture, and the fundamental interests of the overwhelming majority of the people. In all three of these respects, Shanghai is out in front of the whole country. Therefore, Shanghai represents the advanced nature of the Chinese Communist Party.
- Shanghai's development is stable and rapid. Shanghai's rapid, stable development has garnered the support of the central authorities, but it does not rely on the central authorities (中央). Gansu province, currently, still must depend on the central authorities. Shanghai has the ability to help Gansu province shake off its dependence.

3. On resisting the Central Committee of Chinese Communist Party
- It seems that Deng Xiaoping's statement, "Development is the hard truth," isn't uttered much anymore. Why not? Is development not the hard truth? Then who will tell me what is the truth?
- There are some who take Deng Xiaoping's ideology of a well-off society to mean that people who reach a well-off standard of living should not continue to improve their standards of living, that they must wait for those people who have not reached a well-off standard of living to reach it before they can continue to improve their standards of living. Such an understanding makes no sense at all. We cannot succeed in building socialism using such a mechanical way of thinking.

- When the sun rises, it shines first on the East. It doesn't shine on the East and the West at the same time. We cannot but respect this fact; to respect it is to respect science. Balanced development can only be achieved step-by-step, through a smooth transition. Balanced development is not killing the chicken to get the egg; killing the chicken to get the egg is disrespect for science. Balanced development does not mean robbing the rich to help the poor; robbing the rich to help the poor would leave all equally poor, not equally rich.
- Macroeconomic readjustment is something I approve of, and balanced development is of course is good. But sound macroeconomic adjustment and balanced development definitely do not mean making a healthy child eat less just as it's growing up while making a baby with a tummy ache stuff its stomach. Nor, of course, can you make sick person waiting for stomach surgery eat a big meal.
- We cannot treat macroeconomic readjustment and balanced development as synonyms for egalitarianism. Our party-state’s historic experience with economic building proved long ago that egalitarian thinking will only strangle development.
- Development has an order of priorities. Development can never be absolutely balanced. To make a slogan of something that is impossible may have the temporary effect of boosting people's morale. But to regard it as true is to fool oneself, and to fool the masses.
- Do we want to renew the old cities and to build more new and developing cities, or do we want to limit the development of old cities and the rise of new and developing cities? Do we want more peasants to become urban residents? Or do we want peasants to forever be peasants? Then why are there certain people at the center who don't think straight, and want to put added limits on the people renewing [old] cities and giving rise to new and developing cities?

4. On policy "adaptations" (变通)
- Corruption and policy adaptations are not one in the same thing. Corruption is when someone schemes for personal gain. Policy adaptation is to work for something better on behalf of the people's interests.
- On matters that I approve of, I live up to my word. [But] there are matters on which I live up to my word but don't have the final say. Should there come a day when higher authorities say that what I say doesn't count, I'll be responsible to the higher authorities, and you too shall bear the consequences. For us to be able to work together, you must be clear on this point of mine. Otherwise, do not work with me. I'm the kind of person who doesn't fear the risks, so long as I do things worthy of the party, worthy of my conscience, worthy of the people. I do not shirk responsibility. If I have something to say, I say it. I say it clearly first, and then I act on it.

5. Attacks on leading comrades and central authorities' policies
- Housing prices are soaring because the supply of homes isn't meeting the demand. Land prices are soaring, and transfers are netting huge profits, because the supply of land isn't meeting the demand. Even among watermelon peddlers, there's not one who doesn't understand the principle of supply and demand. But among the leaders of our party and government, there are people don't understand it. They can't even pretend to understand it.
- Our comrades in the leadership should change their work style of issuing written instructions on certain specific economic disputes before the disputes are investigated and reviewed. This practice does not employ legal means to resolve economic disputes, nor does it constitute normal administrative operations. This sort of practice will stir up a reaction and produce chaos. It does not increase the party's ability to rule; it curtails the party's ability to rule. Because the party's ability to rule must reflect the importance attached to relying on law to resolve disputes, not reflect how much power party leaders have to do so.
- All people are equal before the law. We cannot disrespect, or fail to consider, written instructions from our comrades in the State Council leadership on the most trivial of matters. But what article of law do written orders from the State Council leaders count as? If I haven't violated articles of law, who will warn me? If no one tells me, then this question can only be decided in a court of law. We will of course respect the court's decision.
- Population flows have been an important factor in accelerating uneven regional development. How many provinces and cities have set up offices in the capital? The establishment in Beijing of city and provincial offices from around the country has expanded consumption in the city of Beijing and contributed to the development of the capital. How many provinces, cities, and enterprises large, medium and small have set up windows in Shanghai? How many people from other regions have come to Shanghai in search of opportunities to develop? How many enterprises from Hong Kong, Macau, Taiwan and foreign countries have established organizations in Shanghai? All of these have gotten positive feedback and accelerated Shanghai's development. So how can you demand that the whole country achieve "balanced development"? You could issue a document urging them all to go to Yan'an, but if they don't go, then what? You'd still rather build Shanghai's tall buildings in Yan'an to "balance development"? If you built Shanghai's tall buildings in Yan'an, the price certainly would not be high. But does that make sense? Wouldn't that be all too unreasonable?
- There are people who suspect that the current central leadership is too inclined to use administrative means to intervene in economic and social affairs. I don't think so. But certainly there are people who misunderstand the thrust of the central authorities. They mistakenly think that the gist of the central authorities is to use administrative measures to intervene in economic and social affairs and that in practice, they take this shortcut of administrative intervention. I reckon the problem lies therein. We need to correct this misunderstanding.
- There are people who are constantly citing foreign media rumor-mongering and slander about the so-called "Shanghai faction" to discuss matters. I want to take the opportunity today to ask these people a few questions in return: Why do reactionary foreign media hate the "Shanghai faction" in this way but not the hate "Gang of Four" in this way? Why do reactionary foreign media wish ill upon our country's fast development daily while extolling times when development stagnated and regressed during the Cultural Revolution? Whether there are persons within our Communist Party behind this phenomenon, I do not know. However, I also am not a know-nothing.
- If there are people in our party with divergent views who wish to use the reactionary foreign media to launch public opinion attacks on their own comrades and colleagues, isn't that tantamount to telling the whole world that we cannot settle our own internal affairs within the party? When this kind of incorrect work style is compared to the corruption that exists within the party, which is more dangerous to the party's survival? To say this sort of behavior is the same as acting "against the party and against the Chinese motherland" is a bit strong; but if it develops further then then they will be anti-party and anti-Chinese, and there'll nothing wrong in saying so.

6. Bloated Individualism and Quibbling
- Shanghai is a testimony to Deng Xiaoping's [statement that] "development is the hard truth". Shanghai is a symbol representing the advanced nature of the Chinese Communist Party. Shanghai has been the testing ground for rapid development since the "reform and opening". Shanghai is the pride of our government. Under the leadership of my party, that is Shanghai, "my Shanghai". - As the party secretary of Shanghai, I, guided by the policy thrust decided by the central authorities, am responsible for matters within the scope of my duties. The scope of my duties is different from that of the General Secretary. And the scope of the General Secretary's duties is different from mine. We are both Communist Party members, but this is not to say that there is no boundary line between our work and our duties. The Communist Party is a group, not a single person. There is division of labor among the leaders of the Communist Party. The Communist Party has inner-party democracy. My personal understanding is that it applies to the Communist Party, not to a single person.
- The policy of macroeconomic readjustment has not brought about its predicted results. We have to take a scientific attitude to analyze this. The city government of Shanghai, in thoroughly executing the policy aspects of the central authorities' macroeconomic readjustment, carried them out fully and completely. Yet private capital and foreign capital continued to flow into Shanghai, and circulation of funds among private individuals was very active. We have taken note of this problem, but we do not have a policy to take measures against it. Anyway, how can we prevent Mr. Zhang from lending money to Mr. Li? Our party doesn't have such a rule, does it?
- To promote sustainable development of the economy and society that is coordinated in an overall way, I'm stressing an emphasis on utilizing economic and social means. My idea is not to negate the use of administrative means. I also have not meant to spurn the leaders of the party. What I mean is that that when economic means can and should be used, we mustn't consider the use of administrative means to be a shortcut. When developing a market economy, rashly using administrative means to intervene in economic and social affairs will leave undesired aftereffects. And if legal means can and should be utilized to resolve problems, then do not use administrative means rashly either. Improving our party's ability to govern does not amount to increasing the proportion of administrative means used to intervene in economic and social affairs. That's not how I understand it.
- If I'm not mistaken, our country's private enterprises produce over 40 percent of GDP nationally. Here in Shanghai, state enterprises produce nearly 80 percent of GDP. If you want to discuss the issue of who adheres most to socialism, couldn't it be said that Shanghai adheres most? The words of certain people who at every turn want to hang the capitalist hat on Shanghai are unworthy of rebuttal. Shanghai has built a model for our country's socialist market economy, and it's the direction toward which our country's socialist economy is developing. Shanghai has not practiced capitalism. For Shanghai to wear that hat on its head would be unsuitable. It wouldn't fit. Once the national GDP surpasses Shanghai's in [proportion of] state enterprise [productivity], then you come talk to me about whether Shanghai is adhering to socialism or not. Otherwise, I beg your pardon. Don't waste your time or mine.

7. On Market Economics
- Those cadres who have objections to the State Council's specific measures of macroeconomic readjustment must not just complain. You must come up with specific ways of your own. Take the matter on its merits. First thing's first, second thing's second. Think about specific ways around specific problems. It's people who think up the measures, after all. To work scientifically with economic problems is to fully protect and use market mechanisms. As long as a market exists, surely there will be solutions, and surely problems can be solved.
- Capital has to flow before it can give full play to development. To prohibit or limit the flow of capital is to waste capital. It's not conducive to development. Under a socialist market economic system, the flow of capital has its own scientific laws. And to some degree, the scientific laws therein are the same as those under a capitalist system. If you say it's not the same, then please present some scientific evidence. If you only believe that there are different scientific laws, but have not yet discovered them, haven't summed them up, then as a temporary replacement, simply use the laws of market economics already discovered under that the capitalist system. When the airplane had yet to be invented, but there were already trains, if anybody had said that since the airplane wasn't invented we better keep on riding by horse-drawn cart, who would have understood? Everyone would think this person's brain was screwed up.
- The places where real estate prices are excessively high, places like Shanghai, Beijing, Tianjin, and Shenzhen, all have established rather sound real estate market mechanisms. There's no one forcing anyone to buy a house, nor is there any problem with housing assigned by work units. In terms of excessively high real estate prices, two problems are spoken of: One problem is with new housing built in the prime sections of the city centers with nice green environs and convenient transportation. The homes are usually quite large and luxurious and the price is high, even very high; but there's no problem of it being "excessive". Whether the price of housing is excessively high or not, the market will have a natural balance. If apartment prices are excessively high, then no will buy them. So how can they be excessive? Isn't the matter as simple as that!
The people who say that real estate prices are excessively high are, in reality, talking about a separate problem. The problem is that ordinary people in city centers cannot afford to buy these sorts of homes that are rather large and luxurious, and ordinary people cannot afford to buy those villas in the subdivisions. This type of real estate is of course excessively high in price to ordinary people. But the problem there is not that the price of real estate is excessively high. Other homes not so centrally located are affordable to ordinary people, and the government is also trying hard to help them purchase homes. The Shanghai city government has done much in-depth, painstaking work to safeguard Shanghai's stability and development. If, say, we were to build some low-standard housing in the city center to allow ordinary people to afford it, then they would not consider real estate prices to be excessively high. But would that be in accordance with the laws of the market and of economic development? Would it accord with scientific market mechanisms? By no means does there exist a problem of "excessively high" real estate prices. Pushing down housing prices is a problem that should be resolved through the relationship of market supply and demand. To want to solve the problem through meetings means to want solve the problem through administrative means, but administrative means cannot resolve a problem of market supply and demand. Market supply and demand has its own scientific laws. Therefore, the real problem is that a problem that's not a problem has been treated as a problem, and unscientific means have been used in attempt to solve a problem that's not a problem. People this managing affairs – now there's a problem!
- The market should decide how high the profits of real estate developers go, and how much the government benefits from real estate development and trade. Right now demand for land exceeds supply, so our policy is to seek out more land. Right now the demand for housing exceeds the supply, the demand for luxury housing exceeds the supply, and the demand for ordinary housing exceeds the supply as well. So our policy is to encourage developers to build more housing. If developers' profits are very high, then naturally there will be even more developers entering the trade. And market competition naturally will achieve a kind of balance. In these respects, the government need only lay down a policy of protecting the market mechanism. There is no need for the government to stick its hands in and manage real estate prices and developers' profits. If the government manages too much, it will mismanage, and the market mechanism will be strangled. If the government manages arbitrarily, the result will be an even more severe shortfall of supply. Instead that will make real estate prices even higher, and developers' profits higher too. If the government meddles and manages arbitrarily, it will cause chaos in the market. Without a doubt, tightening up the supply of land, cutting down financing to developers, cutting down the supply of home building materials and adopting a harsh system of approvals toward developers, in reality not only will not reduce the price of real estate and the exorbitant profits of developers. To the contrary, it will raise real estate prices and developers' exorbitant profits, and instead encourage speculation in housing. It is demand exceeding supply that will cause the market mechanism to operate naturally and expand supply, and allow the relationship between supply and demand to attain a balance. That's the way to control real estate prices, developers' profits, and housing speculation at a reasonable, balanced level. This kind of control is natural, not artificial.
- When Comrade Jiang Zemin was still Mayor Jiang, he referred us to a case from the mid-eighties, when the Shanghai Ethyl Factory was facing stoppage in production. The Shanghai Ethyl Factory's main raw material was dried sweet potato （山芋干）; you probably call it dried yam (地瓜干). Originally, it was supplied mainly from Anhui province. Then after the economic reforms, the peasants in Anhui decided for themselves what to grow in the ground, and Anhui's village and township enterprises began to produce ethyl alcohol themselves. So the Shanghai Ethyl Factory couldn't find dried sweet potato and had to halt production. Could you say Anhui province should be blamed for "localism" because of this? At the time, in order to rescue the Shanghai Ethyl Factory, Shanghai began to raise its price; it bought up dried sweet potato, and the problem was resolved. Not only was the problem resolved, but later the Shanghai Ethyl Factory also transferred technology to Anhui province, and helped prop up the ethyl processing industry in Anhui and other outlying provinces, and everybody benefited. Because the purchasing price of sweet potatoes rose, the Anhui peasants' incentive to grow it also increased, and no phenomena of limitlessly rising prices arose. Following the Third Plenum of the 11th Communist Party Central Committee [December, 1978], the state gradually set forth the status of the socialist market economy. Economically, the localities had the right to make their own decisions based on their own local circumstances. Competition arose between different localities, and this drove economic development. So when market mechanisms are allowed take effect according to their scientific laws, the result is benign interaction. If the government interferes, market mechanisms are artificially damaged, and vicious competition will arise. The vicious competition I speak of is a governmental problem. Back then, suppose the Ethyl Factory's original price could not buy sweet potatoes and Shanghai had sought out the State Council, and the State Council had decided that Anhui was not allowed to produce ethyl and instead had to use its dried sweet potato to guarantee the supply to Shanghai, or that the State Council had decided that Shanghai was not allowed to raise its purchasing price for dried sweet potato. If that’s the way it was, then that would have been "localism" protecting one party. Shanghai and Anhui surely would have gone before the State Council and criticized one another for practicing localism. Yet when the mechanisms of the market are allowed to take effect, the problem of "localism" fundamentally does not exist. When economic activity is marketized, economic decisions are free and economic policies are open. What we need is to guarantee that full play is given to market mechanisms, to encourage benign interaction. Competition that arises in the market is all concrete, it's all local, but none of it is what some people say is localism or whatever. Yet if the central interferes in market competition, then it would have ended up just the way I postulated before. The State Council would have decided that Anhui was not allowed to produce ethyl and instead had to use its dried sweet potato to guarantee supplies to Shanghai; or the State Council would have decided that Shanghai was not allowed to raise the purchasing price of dried sweet potato. That way, by contrast, localism would have arose.
8. Shanghai Localism
- As long as Shanghai has what the whole country wants, then balanced development will not balance out Shanghai. We in Shanghai need not worry about that. When others are unwilling to say that "development is the hard truth," we profess this hard truth. When others are at a standstill, we continue to develop. This is my Shanghai localism. I have absolute confidence in reform and opening and in market mechanisms, and if no one among you doubts it, then that's good. As long as Shanghai "keeps advanced" in scientific research, manufacturing, banking, commerce, culture and all other respects, then no matter how other people want to allocate it, how can the money be even? The money will always be spent in Shanghai. On this point I have absolute confidence. Am I not right?
- When the city of XX in Jiangxi province wanted to attract trade and investment from abroad, they spent their first sum of money here in Shanghai. In Shanghai they hired experts. How did they succeed in attracting trade and investment and making money? They exported their products through Shanghai. Shanghai helped them make money, and Shanghai made money too. Not to mention that all of their bosses bought homes in Shanghai, and their bosses had relatives who opened stores in Shanghai, too. After ten years, they are the same as us. They're all Shanghai residents. And at least their will be next generation as well.
- When I was young, I remember, salaries in Shanghai were lower than they were nationally. But the whole country came to Shanghai to spend money, especially at the Number One and Number Two Department Stores. You'd buy a lot of stuff to take back home. At that time, Shanghai had no right to manage the money it made. At that time, we still didn't have market mechanisms; we were not permitted to have market mechanisms. Finances were centrally allocated and transferred by the central authorities. Shanghai could but act as a relay point. Shanghai residents could only get some cheap goods through their work units or factories. That was the only little tangible benefit. Now we don't have to worry about this problem. Now Shanghai has so many private enterprises and foreign-invested enterprises. Even if the Shanghai city government were to give over its finances to someone else to control, so long as Shanghai people have money in their hands, so long as Shanghai's growth allows the whole country and whole world to come and spend, to come and seek out ways to develop, then Shanghai could not stop growing even if it wanted to.

9. Other strange and preposterous ideas
- In the reform and opening, while acting in accordance with the scientific development concept of preserving stability while seeking rapid pace, Shanghai mustn't be afraid to go ahead of the whole country. On a road that our predecessors have not taken, after all, someone must take the first step. Why can't Shanghai take the first step? History has proven repeatedly that we in Shanghai have the ability to travel roads that our predecessors have not taken. In the past, Shanghai was called the "adventurers' playground". If Shanghai is called the " adventurers' playground" once again, what would be wrong with that? To strive for growth requires adventurousness anyhow. If one day Shanghai grew to overtake America's New York, what would be wrong with that? New York has always been the playground of the world's adventurers. Unfortunately for Shanghai, it was interrupted for several decades. If we could make the world's adventurers come to Shanghai, if Shanghai can achieve that kind of appeal, then one day Shanghai might overtake New York, and Chinese language schools in New York would begin to teach course in Shanghainese.
- Our party already has discussed Comrade Deng Xiaoping's statement that "Development is the hard truth." Everybody knows this principle, and everyone identifies with it. If there was not someone who wanted to refute or change the understanding of it, then as I see it, there would be no need in the least to call a meeting to deliberate over it further, no matter how [the purpose of the meeting] is nominally phrased. Suppose there was someone who wanted to call a meeting to deliberate over the name of the city of Beijing; would you think that it was for the purpose of enhancing and raising awareness of the name of the city? [Right now] Someone is purposely avoiding mentioning that "Development is the hard truth". But over the long haul, I suspect, there will be a son who does not wish to recognize his father. The son wants to prove he's wiser than his father. If he can slowly prove it and everyone can see it, than that's fine for him. What's the rush?
- The cadres of our party must rely on the masses. I've never said that relying on the masses means we can only rely on the masses of workers, peasants, soldiers and neighborhood committees. That is the former way of saying it. Entrepreneurs, businessmen, and people with brains and influence in technological, cultural and intellectual circles, all are our masses too. Foreign businessmen are also our masses. Everybody is part of the masses upon whom our party cadres should rely. Therefore I stress, the cadres of our party really must manage to open their minds.

Xinhua News Agency Internal Reference Materials: Selected Views of Chen Liangyu (Part II)
10. Criticisms and attacks on individuals made outside the party
- China's "peaceful rise" is something to be achieved, not talked about. Mention it once and it's unnecessarily suspicious-sounding. Mention it too much and it's boasting. It's also not conducive to China's stability and development, and it's irresponsible. If China tries hard to maintain stable development over the long-term, there really will come a day when China achieves a "peaceful rise". But there's a problem in using a slogan like "peaceful rise" to arouse patriotic enthusiasm. Patriotism already has been cooked up much too hot among Chinese young people. Youths will let their minds roam so far as to think about fighting, killing, bombing, landing, and occupying. These are the things they shout for. If your youths always think this way and shout this way, other people will be scared into fearing China. If you say you want to "peacefully" "rise", then who can trust whether you say you want "peace" or want to fight and kill? People elsewhere fear China's current development. Once people are afraid, surely they won't want to allow you to "peacefully rise". If you've only just gotten off your butt and they already want to stamp you right back down, then don't even think of ever getting back up. What's been said is said, but hereafter, talk like "peaceful rise" is best left unspoken. This is my personal opinion. I'm only concerned with the facts, not with the individuals.
- When we talk about patriotism, it's best not to speak constantly about topics like the Eight Allied Armies and the Japanese invasion of China. To speak [of patriotism] scientifically, according to human nature, and according to the demands of social stability and harmony, an individual's patriotic ideas should comprise a series of different levels. First, one should love one's parents, love one's children, and love one's family; after that, one should love one's classmates, love one's colleagues, and love one's neighbors; next, the person should love society; love oneself, and love the place one lives. Only when one has accomplished all of these can one really enter into love of the country, love of the party, and love of the people. If we see someone whose treatment of his parents and his adoptive mother is most heartless, then we shall suspect that the love of country, love of party and love of the people that this person speaks of might be very false.
- China wants a stable domestic and international environment for it to develop. The effort to achieve and preserve this sort of environment for growth is the key problem of our past, present and future. It also requires that the senior leaders of our party and government be individuals of steady disposition. Whether Comrade Hu Jintao's character meets this consideration, I am not clear. Based on some reference materials, I have noticed that, when Comrade Hu Jintao was in Tibet serving as First Secretary of the Party Committee of the Autonomous Region, in order to deal with a small number of monks rising in revolt, he personally donned a steel helmet on his head and held up a tommy gun. Yet I do not consider this the expression of a steady character. I hope that the collective leadership of the Standing Committee of the Politburo takes note of this issue when they make major decisions.
- What I detest most is when someone makes irresponsible remarks about someone else's health. Someone who gossips about others' illnesses has a health problem himself. I don't need a doctor to make that diagnosis. This person definitely has a psychological problem, and a psychological problem is also a kind of illness. There's no way to cure this kind of illness.
- I got my start doing actual work, not by dint of speaking falsehoods, paying lip service, and talking a lot of nonsense. Inherently, I have no way to maintain agreement with the kind of person who grows and thrives by speaking like a human being in front of people and lying behind their backs. I don't trust that people who depend on speaking falsehoods, paying lip service, and talking a lot of nonsense, and who grow and thrive by speaking like a human being in front of people and lying behind their backs, can represent the interests of our party, our government or our people.
- There's no need to speak intimidations toward me. That won't do any good. I served in the army from 1968 to 1970. At that time we were concerned everyday that we would go to war with the Soviet Union. Every day the army had to grasp wartime thinking, to arouse the troops. From that time on, I began not to fear death. But I've lived another 35 years. Now, I fear death even less. Nor would I feel I needed to put a steel helmet on my head to deal with a few monks.
- After I got busy with work, I was seldom able to care for my father, and I feel bad about that. When people are able to provide my father some assistance, and allow him to pass his days rather comfortably, I'm very moved. It relieves a bit of the pressure on my heart. I cannot imagine that in fifteen years, I could manage not to ever visit the adoptive mother who reared me from a young age. Or that after becoming the supreme leader of the country, that I could not go in person to sweep the graves of my own father and mother, and would have my son go and perform token formalities instead. I could never do that. Because I am a person of flesh and blood.
- To decide to make policy adaptations for the sake of the vital interests of the masses accords with our party’s principle and spirit of "seeking the truth from facts." Of course, there are risks to doing this. Whether these risks are big or not depends on the person making the decision to adapt the polices, and on whether or not people possessing greater power put the vital interests of the masses in a certain place. The risks for me are not minor. Because among my higher-ups are two shi la wu zi. (a Zhejiang obscenity, meaning sons of thieves).
- Our country's current economic reforms started in the countryside. Rural economic reforms began with a production team in Anhui province's Chu county. When the production team first started to practice the contracted responsibility system, it did not tally with the central authorities' policies and laws of the time. The production team’s cadres took great risks. How did they begin? I remember that at the time, they had an agreement. The agreement stated that if a production team cadre was imprisoned for allocating the fields among the different households, then the all the members of the commune had to take charge of his family's farm work, as well raise his children to the age of eighteen. How tremendous! In the agreement there was another clause, also tremendous, that apparently said that the matter was not permitted to be spoken of with superior authorities or with outsiders; whoever said anything would be the enemy of the entire production team. This episode has become a part of party history. That person who grew up in Anhui surely must not read party history, for it seems he is utterly unaware that our country's current economic reforms began this way. That adoptive mother of his was really a waste. She raised him in vain.
- I'm a person who does not belong either to the optimistic school of thought or the pessimistic. In the past, I always liked a line from a sorceress in a foreign film that I'd use over and over as my pet phrase. Now in my mind I still often think of it. That line is: "Focus on results." Our economic reforms of today began in the countryside. Rural economic reforms started from a production team in Anhui who defied the policy directives set by the central authorities but were "focused on results". This production team violated the central authorities' policy directives, yet made shocking achievements, and the results were affirmed and popularized. That is precisely to 'focus on results." It's already recorded in Communist Party history. That precisely the meaning of Deng Xiaoping's "development is the hard truth". People who don't remember this must go back and have another read. Should there be a day when those shameless scoundrels boot me out, take me down - this kind of thing is not outside the realm of possibility, I said I'm a pragmatist, I'm not blindly optimistic nor blindly pessimistic – then at that time, the best way for those of you thinking of me to handle it is to show them proof of our results.

11. Ideological confusion
- If you do not have the time to read other (books), it's not a concern. But you absolutely must take the time to read the "Selected Works of Deng Xiaoping" and the Selected Works of Jiang Zemin" thoroughly. I don't mean to say that other (books) are not to be read. What I mean is, if your job is to be a good driver, then you definitely have to know the traffic regulations and how to drive, but you do not have to know the principles of a car engine and how cars are built. Even if you don't know the function of a car's exhaust pipe, it won't stop you from being a good driver.
- Putting too much emphasis on stability will only make people think that in reality, things are not stable. Putting too much emphasis on harmonious society will only show that in reality, society is not harmonious. It is correct to emphasize such words on appropriate occasions. But when taken as pet phrases, and used indiscriminately and too often, they become counterproductive. Our meeting today has been going on for one hour and forty minutes. Haven't you begun to feel a little dizzy? Begun to feel as though you want to take a nap? Thirsty? Hungry? If I don't speak this way, perhaps most of you will not realize you have such sensations. But once I speak this way, do you not begin to have these sorts of sensations? This is exactly what I mean to say. It's called psychology.
- In the case of mass disturbances, anyone who violates the law should be punished according to the law. We can't merely penalize the leaders. If we merely punishing the leaders, does it represent that our government is lenient toward people who break the law? Or does it represent their belief that the "law does not extend to the masses"? Neither of the two tallies with the spirit of "rule according to law". People who create mass disturbances when they legal avenues but do not pursue them, and judged by courts but not subjected to the verdicts, must be punished uniformly. Otherwise they'll have absolutely no respect for the law, and "rule according to law" will be nothing but wasted breath.
- China is led by the Communist Party leader, and every locality in China is led by the same Communist Party leaders. The localities have to abide by the central authorities, and the central authorities also have to cooperate with the localities. The central authorities have to cooperate with the localities, but the central authorities cannot possibly understand the real situation locally as the local governments do. The central authorities may listen to reports and make inspections, but they still won't understand the real situation in the localities in the way local governments do. Therefore in the localities, when we speak of the Communist Party leaders, we're referring to the local Communist Party government leaders. Only such leaders are concretely connected and can solve problems. Simply abiding by the central authorities does not solve concrete problems. The relationship between the central authorities and the localities should be understood this way. The leaders of the Communist Party also should understand it this way. Divorced from the real, specific place, everything is meaningless.
- In the course of systematic reform, we definitely must be careful about delegating power to lower levels, because after power is delegated, taking it back gives rise to problems that are harder to solve than before it was delegated at all. So what to do about problems that arise after the power is delegated? As I see it, the only way is to trust and depend on the legal system. Those aspects of the legal system that are lacking have to be perfected. To handle problems that arise where power is already delegated, adopting methods to take the power back is not a good way. Give and take back, give and take back, and the people are bound to feel that the routes of reform and conservatism are struggling against one another. In fact, with respect to reform, all of us are completely in agreement. So we should not continue this practice of retaking power any longer. What we have to do is perfect the legal system. That way, the people will not feel that the routes of reformism and conservatism are struggling against one another.
- How large the scale of the United Front Work Department's work in Shanghai actually is, I, the party secretary of the city, do not know. What I want to ask is: in Shanghai, this international city with a high level of openness economically and culturally, are there people monitoring the United Front Work Department's work, and how are they monitoring it? The United Front Work Department's work in Shanghai already has had a direct effect on Shanghai's work. In the course of our projects to attract foreign investment, recruit talented personnel, conduct foreign trade, and carry out cultural exchanges between China and abroad, we find the United Front Work Department obstructing and interfering with us everywhere. What department should I seek out to investigate whether the United Front Work Department is carrying out an assignment from its superiors, or if it is secretly doing its own or others' private work. I think that we must have a system to oversee this, and the local government should have the right to participate in the surveillance.
- Obedience must be justified. To require absolute obedience without justification is not realistic. Soldiers in the army must abide absolutely by their senior officer. But to depend on such a system of obedience alone is no good. So in the army there also must be ideological work, war mobilization, and so forth. For the party central committee to demand absolute obedience from the localities, it must allow internal debate and public debate. Right now, in many localities, there is absolute disobedience toward some of the policy directives of the central authorities. As the central leaders, shouldn't we be discussing in this meeting whether central policy directives are unreasonable, unconvincing? Is it the case that some central policy directives are fundamentally unrepresentative of the places all over the country? When we run into problems, shouldn't we first examine where our own problems lie? Sure, the central authorities are the boss of the localities, but the central authorities have to be a good boss. You have to act like a boss to be a boss. Otherwise, if the localities act as their own bosses, who can you blame?
- With the problem of corruption, people must have power to be corrupt. The more powerful people are, the more corrupt they can be. It's out of the question for people without power to be corrupt. They can only bribe people with power. Therefore, in considering the problem of corruption, to merely investigate and punish is to treat the symptoms but not the disease. To treat the disease, power must be dispersed, unnecessary power cancelled out. With respect to land approvals, key state investment projects and so on, the phenomenon of corruption is widespread in our country. So with respect to land approvals and key state investment projects, why don't we make use of power a little less and markets a little more? The same goes for a lot of other areas. The power of the government is the root of corruption. Augmenting the power of the government will only augment corruption. But decrease the power of the government, let go of matters that needn't be bothered with, and allow market mechanisms to balance thing out naturally, and when the people stop seeking realize their owns gains through power, corruption will lose its breeding ground. Then it can be controlled. But use even more power to fix corruption and as a result, it will cause more corruption.
- I'm resolutely opposed to spreading a plan around the country for coordinated economical housing prices, where the government takes the lead in allocation and sales. By no means can this sort of planned economics resolve the predicaments of families in dire straits. To the contrary, this will give the government an even more authoritative function. And the more authoritative its function, the more opportunities there will be for corruption. I think the function the government should play in this regard is to survey the market, to comprehend the market, and to encourage the market to provide economical housing sufficient to satisfy the needs of society. Do not forget, we are still living in the primary stage of socialism. "Distribution according to one's needs" is not on our agenda yet. There will always be people unable to afford to buy housing. This problem is a normal phenomenon in the primary stage of socialism. When we get to the high stage, then we can solve this problem. To speak of solving this problem right now, if it's not cheating the public, then it must some great leap forward. And it's also possible to suspect that people are creating certain new functions of government power in order to give themselves opportunities for corruption.
- [I] propose that inner-party democracy be reflected not only in inner-party criticism. It must be reflected in the autonomy of local party organizations over local affairs. And the model for it must be set from top to bottom. The inner-party democracy we have currently proceeds from bottom to top. At best, it's democratic discussions among party members, and at worst, it serves to encourage people to rise in rebellion. I hold to the belief that inner-party democracy cannot merely proceed from bottom to top. When it gets to the top, it's only centralized and not democratic. So inner-party democracy must proceed from top to bottom.
- Discussion of strengthening the leadership of the party cannot be divorced from Comrade Jiang Zemin’s theory of the "Three Represents". Divorced from Comrade Jiang Zemin's theory of the "Three Represents", strengthening the leadership of the party comes to mean simply protecting the interests of the party and forsaking our party's most wide-ranging service - on behalf of the basic interests of the people. There are those who say that the formulation "strengthening the leadership of the party" is not precise enough, that it should be worded "strengthening the service of the party", to highlight the concept of serving the people. That way, it would not give people the wrong impression that the Communist Party is also a special interest group. It would also be a better embodiment of our party's special character of serving the people.
- I never ever said I was a hoodlum. Who would believe that I said something like that? I did say: "There are people who should not behave like hoodlums. If someone behaves like a hoodlum toward me, then I'll be even more of a hoodlum." That I did say, and I'll say it again. I'll explain what I mean: There are people who take matters we discuss within our party to Hong Kong. They add oil and vinegar and start rumors and slander about those who criticize them. That is behaving like a hoodlum. I won't take after this kind of behavior. I won't use it. I look down upon this kind of person. When I say I'll be even more of a hoodlum, I'm saying that if things continue develop this way unchecked, I'll break the rules as well. Abiding by the rules is not easy, but breaking the rules is very easy. "I'm not making threats. Only a mad dog can jump a wall. But if wasn't for the mad dog jumping the wall, man [I] wouldn't have any way of handling it.
- Our society is still composed of family units. The family is the most basic cell of society. So speaking of the family's interests is the same as speaking of the nation's interests and the state's interests. I believe you can trust the sort of person who would help a friend at the loss of his own life to sacrifice his own individual interests, or even the interests of his family, for the sake of the interests of the nation and the state. But the sort of person who's a friend in one's presence but who sells out friends behind their backs - can this person be trusted to sacrifice his own individual interests for the sake of the nation's and state's? That sort of person is a vile character (小人). People who trust that sort of person are also vile characters. Within our party, we have vile characters like this from top to bottom. We cannot but beware of such vile characters.

So, there is increasing rumors that the anti-corruption investigation is spreading to Beijing in a big way. It is, however, much less clear who the ultimate target of this massive investigation would be. There are three possible end targets: Mayor Wang Qishan, Party Secretary Liu Qi, and former PS and current PSC member Jia Qinglin. As others have suggested, I really don't think Wang is the target, since he only took power a couple of years ago. This leaves Liu Qi and Jia, and my money is on Jia. This leaves open the question of whether the Central Discipline and Inspection Committee will "find" anything. It could just be a way to create pressure on Jia before the 17th Party Congress next year so that he goes along with what Hu wants.

Reuters

Anti-corruption probe spreads to Beijing

October 26, 2006 - 3:09PM
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More than 300 investigators have descended on Beijing as a government crackdown on corruption spreads from China's financial hub of Shanghai to the capital, two sources say.

The Beijing investigation follows the dismissal last month of Shanghai Communist Party chief Chen Liangyu, who also lost his seat in the party's decision-making Politburo, making him the most senior Chinese official toppled for corruption in a decade.

The party's Central Commission for Discipline Inspection sent more than 300 investigators to Beijing after 200 were dispatched to Shanghai, the sources said.

"The message has been relayed to the Beijing city government," one government source told Reuters. Civil servants are barred from speaking to foreign media without authorisation.

Beijing Mayor Wang Qishan had dismissed as "nonsense" media reports that the Chinese capital has been targeted by a massive corruption probe.

But the source said the Beijing city government was asked to cooperate with the investigation.

Officials with the Beijing city government's anti-graft office and the municipal government spokesman's office said they had not heard of the investigation.

It was unclear if the investigation had anything to do with the Shanghai scandal or the dismissal of Beijing Vice-Mayor Liu Zhihua in June after being accused of corruption and dissolute behaviour. Liu oversaw construction projects for the 2008 Beijing Olympics.

"Hu went after Shanghai first because Beijing is a much tougher place to handle," said a second source with ties to the leadership requesting anonymity to avoid repercussions.

Hong Kong's Beijing-funded Ta Kung Pao newspaper has said more than 50 Shanghai officials and businessmen have been taken into custody on suspicion of draining money from the city's 10 billion yuan ($A1.66 billion) social security fund for illicit loans and investments.

The second source said Beijing officials suspected of corruption and businessmen could be taken into custody as early as next month.

Alarmed by chronic corruption which has spawned social unrest, President Hu Jintao took on corrupt officials in Shanghai - the political stronghold of his predecessor Jiang Zemin - as he sought to root out abuse, enforce loyalty and further consolidate power.

On Sunday, Hu appealed to the party's 70 million members to show solidarity when he and Jiang made their first joint public appearance since the Shanghai scandal surfaced.

Hu graced a meeting of the International Association of Anti-Corruption Authorities in Beijing later that day and pledged to step up efforts to "improve the rule of law and a culture for clean and honest government, and strengthen the checks and supervision on power".

The Ta Kung Pao newspaper on Thursday quoted Wang Jianming, the top anti-corruption official of the Supreme People's Procuratorate, as saying more than 4,000 Chinese officials were wanted for corruption and had fled abroad.

A colleague sent the following article highlighting the likely increase in non-performing loans in the near future, and the warning came from PBOC vice governor Wu Xiaoling. I think that the numbers might not show up immediately due to the variety of ways to hide it or write-down bad debt in China.

You are right that NPL amount will surely rise, and with lending slowing dow, the ratio could also rise again. However, with all kinds of money sloshing around, they can mobilize numerous accounting tricks to cover or "solve" the problem right away. For example, if a major provincial construction project is in trouble, they can have the State Development Bank make a long-term loan to the province, which it then uses to repay the commercial bank....etc. Huijin and the Social Security Fund can likewise inject money through buying equity stakes in various provincial investment companies. The possibilities are endless. This is why there has been a steady growth in the ratio of long-term loans. With long-term loans, the banks know almost nothing about the performance of the borrowers, except that they are making their payments.....


Monday, October 23, 2006
Bad loans 'could rise again'
AGENCE FRANCE-PRESSE in Beijing


--------------------------------------------------------------------------------

A central bank offical has warned that bad loans in the banking system
remain a "huge and difficult" challenge even as the nation's largest
lender completes a world record share sale.
"The foundation for sound asset quality still isn't solid," People's
Bank of China deputy governor Wu Xiaoling told a financial conference
in Beijing, according to the sina.com website Monday.

"The task of avoiding a rebound in non-performing loans is still huge
and difficult," she was quoted as saying at the conference on Sunday.
Ms Wu made the remarks a day before the Industrial and Commercial Bank
of China (ICBC) announced the pricing of its much-anticipated initial
public offering, setting the stage for what is likely to be a US$22
billion (HK$172 billion).

Ms Wu noted that China's state banks still relied heavily on net
interest margins - the difference between what a bank earns in interest
on loans and what it must pay on deposits - and said lenders remained
vulnerable to any change in the economic weather. "Any changes in
macroeconomic conditions will directly impact bank asset quality and
therefore impact the profitability and stability of the banks," she
said.

China's banks were less than ideally positioned to respond to such
challenges, according to the central banker. "China's state-owned
commercial banks lack high-quality talent, even as they are over-
staffed and suffer from low-efficiency allocation of their personnel,"
she said.

The non-performing loan ratio of China's banks dropped to 7.5 per cent
at the end of June, down 1.1 percentage points from the end of last
year, according to previously released data from the banking
regulator. Analysts acknowledge that lending practices have generally
improved over the past several years but also warn that the decline was
really due to government bailouts and aggressive lending in the current
liquidity-fuelled boom.

Since bad debt is calculated as a percentage of assets, an increase in
bank lending can reduce the proportional level of sour loans. The 7.5
per cent level cited by the regulator would be considered almost a
crisis in a developed market economy but represents a huge improvement
in China where foreign analysts estimated that as many as 40 per cent
of all bank loans had gone bad before the current round of reforms.

The ICBC is the third of the big four banks to go public, following
the initial public offerings of Bank of China and the China
Construction Bank. Their share sales followed ambitious restructuring
drives, the injection of a combined US$60 billion and the introduction
of strategic investors. The ICBC received a US$15 billion injection
prior to its IPO.

The Agricultural Bank of China, the only unlisted big four bank and
the worst-performing of the group, might receive a large bailout from
Beijing next year, according to state media.

According to the below article based on a commentary in Economics Daily of HOng Kong, Hu Jintao is waiting until the formal election of the new Shanghai leadership, originally slated to occurr in a few months, to decide on whether to keep Han Zheng or not. This makes a lot of sense, since there is really no great hurry.

Meanwhile, break-neck growth is no longer the main goal in Shanghai, replaced by unity, harmony, and stability.



特稿/上海代理书记韩正能否坐稳 还看六中全会
星岛环球网 www.singtaonet.com


韩正

　　《香港经济日报》分析文章说，踏入10月，中国第一大事是周日（8日）中共十六届六中全会的召开，围绕六中全会的同时，外界最为关注的，是中央如何定案上海陈良宇事件，及其后的影响。

遵照胡锦涛批示 韩正提出“两手论”

　　文章说，首先是原中共政治局委员、上海市委书记陈良宇的处理，北京传出消息，六中全会对陈案会有初步结论，按程序在中央政治局停止其工作后，交由全会讨论免去其中央委员、政治局委员的职务。不过，会否对陈良宇作其他党纪处理，现仍未有最后决定，因为陈案还不断有新发展，不能说已最后结案，因而要到本周六（7日）的全会预备会议前，由高层最后拍板。

　　国家主席胡锦涛对陈良宇事件的批示，已经传达下来，概括起来是两个“坚定不移”，两个“确保”，即要“坚定不移反对腐败，坚定不移推进发展”，“确保团结、和谐、稳定的良好局面，确保上海经济社会发展良好势头”。

　　文章说，胡锦涛的批示，虽说内容是意料之中，但要研究的关键是强调甚么，如“坚定不移”，对上海来说，反腐败是排在发展前面的；至于“确保”，保稳定则是排在保经济社会发展前头。

　　基于这样的理解，代理书记韩正召开“全市党政负责干部会议”，提出“两手论”，即一手抓案件查处，全力配合中央工作组彻底查清问题，严惩腐败分子；一手抓制度建设，从这次查处社保基金案中深刻汲取教训，围绕反腐倡廉，把健全制度、加强监督，摆在更突出的位置上。

中纪委办案人员多回京

　　另一个关注点，是案件还会有何新发展。据悉，中纪委办案人员，除部分留守上海，绝大多数已回到北京，其中抽调协助办案人员已经放假，中纪委核心办案人员则继续整理案情。另一方面，中纪委在“十一黄金周”后，对全国各级纪委书记组织培训，上海案情将成为主要教材。

　　这显示在六中全会前，这案件不可能结案，但案情暂时不会有新的发展。有纪委人士分析，过去不少案件，就像大树那样，从根向上查到主干，上海大案中央领导层拍板一举直击最核心人物，因而现在是由上往下查，未来主要查关连人员。

暂无新发展 会前难结案

　　当然外界最为关心的，是上海大案带来的人事变动。韩正代理书记的职位是否坐得稳，如果坐不稳，谁会到上海？政界人士分析，韩正现在的地位，有点像前特首董建华称病辞职后的曾荫权，有可能坐下去也可能调离；当中有两个关键，一是韩正会不会也被查出问题；二是六中全会上各方反映如何，如果都认为不行也可能换人。

　　一旦韩正交出代理权，谁去上海？目前传出的人选，有浙江的习近平、北京的王岐山、统战部的刘延东等。北京方面的说法，是中央不会急于安排，现在离上海市委换届还有数月时间。（图为上海举办国庆晚会，韩正与外宾交谈。）

According to the following report, Qiu Xiaohua fudged some figures on behalf of the Shanghai government, in exchange for some payoff. I suspect in this case, he ordered SSB to deduct real estate investment figures for Shanghai....again, it is a well known practice, but still sad....

People's Daily
邱晓华被查　“清水衙门”也要防腐
亦　菲
2006年10月20日10:19 【字号 大 中 小】【留言】【论坛】【打印】【关闭】
　　出任国家统计局局长职务才7个月、频频在媒体报道中“上镜”的邱晓华，突然于10月12日被国务院免职。而今，邱被免职的原因已经公布。国家统计局新闻发言人李晓超10月19日在国新办举行的新闻发布会上证实，有关部门在调查上海社保资金案的过程中，发现时任国家统计局局长的邱晓华涉嫌严重违纪，中央纪委正在对其进行审查。（见新华网2006年10月19日电）

　　邱晓华被查处，再次彰显了中央反腐的坚强信心。“党要管党，从严治党”又一次得到验证。

　　与大多数腐败高官不同，邱晓华所在的国家统计局并非通常意义上的“实权部门”。统计部门只是对各类社会、经济、文化情况进行统计，并作出统计分析，既不管人，也不理财，是一个十足的“清水衙门”。那么，属于“清水衙门”的统计高官为何也会出事？

　　据媒体报道，邱晓华自1982年从厦门大学经济学统计专业毕业后便进入国家统计局，先后任国家统计局国民经济综合统计司副处长、处长、见习副司长、副司长，国家统计局总经济师、新闻发言人、副局长，直至任局党组书记，今年3月被任为局长。在长达24年的时间里，除出国留学和在安徽省短暂挂职省长助理外，邱晓华就没离开过统计系统。就是这样一个“老统计”，竟然与上海社保资金案有牵连，这多少会令人感到意外。但事实摆在眼前，“清水衙门”也会滋生腐败。这再次说明，只要是有公权力的地方就有可能发生腐败。

　　以统计系统为例，虽然它并不掌握实权，但它手里却拿着官员的政绩“成绩单”。当地方政府官员想要在GDP上弄虚作假时，统计系统的作用就凸显出来。在一些地方，“统计注水”已经是公开的秘密，这其中既有地方主官进行行政干预的因素，也必然包涵着利益交换的成分。邱晓华涉入上海社保案说明，这种利益交换，已经由地方向中央部门渗透，其危害性值得警惕。

　　邱晓华被查处再次提醒我们，反腐败不能留死角，对公权力要展开全方位监督，特别是要斩断各公权力部门之间的利益交换。

Eh, at the 70th anniversary of the Long March, Jiang Zemin was mentioned just after Hu, ahead of all other existing Standing Committee members.....what's going on. Just paying homage to the former leader, or something more.....

纪念长征胜利70周年大会举行 胡锦涛发表重要讲话
2006年10月22日11:50 【字号 大 中 小】【留言】【论坛】【打印】【关闭】

10月22日，纪念红军长征胜利70周年大会在北京人民大会堂隆重举行。新华社记者黄敬文摄

　　新华社北京１０月２２日电（记者孙承斌　李斌）纪念红军长征胜利７０周年大会２２日上午在人民大会堂隆重举行。中共中央总书记、国家主席、中央军委主席胡锦涛在会上发表了重要讲话。

　　胡锦涛指出，７０年前，中国共产党领导红军将士完成了震惊世界的长征，开辟了中国革命继往开来的光明道路，奠定了中国革命胜利前进的重要基础。这一伟大历史事件，是中国共产党人的骄傲，是人民军队的光荣，是中华民族的自豪。我们纪念红军长征胜利，就是要激励全党全军全国各族人民在中国特色社会主义道路上继续奋勇前进。

　　江泽民、吴邦国、温家宝、曾庆红、黄菊、吴官正、李长春、罗干出席。大会由吴邦国主持。

　　人民大会堂大礼堂内庄严肃穆。主席台台口上方悬挂着“纪念红军长征胜利７０周年大会”的会标，后幕正中是熠熠生辉的中国共产党党徽和字标“１９３６－２００６”，１０面红旗分列两侧。二楼眺台悬挂着横幅：紧密团结在以胡锦涛同志为总书记的党中央周围，高举邓小平理论和“三个代表”重要思想伟大旗帜，大力弘扬伟大的长征精神，为全面建设小康社会、实现中华民族伟大复兴努力奋斗！

　　上午１０时，胡锦涛、江泽民等党和国家领导人与９名老红军代表一同步入会场，并在主席台前排就座，全场响起热烈的掌声。

　　吴邦国宣布大会开始。全体起立，高唱国歌。

　　在热烈的掌声中，胡锦涛发表了重要讲话。他首先代表党中央、国务院和中央军委，向所有参加过红军长征和为红军长征胜利作出贡献的老战士、老同志，向当年支援红军长征的各族人民特别是各革命根据地人民，致以诚挚的问候和崇高的敬意。

　　在胡锦涛的提议下，全体起立，为在红军长征途中和在各地革命斗争中英勇牺牲的革命烈士默哀。

　　胡锦涛强调，我们继承和发扬红军长征的光荣革命传统，就要大力推进马克思主义中国化，不断开拓马克思主义在当代中国发展的新境界；就要大力弘扬革命理想高于天的崇高精神，为建设中国特色社会主义提供强大精神支柱；就要大力加强全党的团结、全国各族人民的大团结，最广泛地为党和人民事业的发展凝聚智慧和力量；就要大力推进国防和军队现代化建设，有效履行新世纪新阶段人民军队历史使命；就要大力加强党的执政能力建设和先进性建设，更好地担当起执政为民、执政兴国的历史重任。

　　纪念大会上，老红军老同志代表、原昆明军区政委谢振华，解放军代表、空军试飞团副团长李中华，青年代表、全国学联主席、北京大学学生刘凯先后发言。

　　大会在雄壮的《国际歌》声中结束。

　　老红军、老同志代表，中央党政军群各部门和北京市主要负责人，各民主党派中央、全国工商联负责人和无党派人士代表，首都各界代表，共约３０００人参加了大会。

Wow, the listing of the Industrial and Commercial Bank of China will create the largest IPO in the world up to this point at 19 billion dollars. Can you imagine if China was to then sell off most of the shares of ICBC or another one of the Big Four banks? Given the huge amount of interest in the listing (I think the figure is by now up to 420 billion USD in orders), I dare say they can easily raise well over 100 billion dollars, or nearly 1 trillion RMB. Can you imagine how many school kids can then go to school?

Unlike interest in companies like Google, however, the high demand for ICBC probably stems more out of a mix of the global saving glut (I am increasingly convinced of this theory put forth by Chairman Bernanke), and short-term expectation of decent profit than genuine confidence in the management. Having done extensive interviews with ICBC officials in 2000-2001, I still find it hard that the bank has really made such a great transition in the space of five years. While I think BOC has really cleaned house and restructured internal management, my impression is that ICBC has not done so to the same extent.

Well, what can one say in the midst of this euphoria. I leave you with what ICBC vice-President Wang Lili told senior officials in a speech she delivered at the Central Party School on January 8th, 2002 "Currently, we have inadequate bad debt reserve and can only use profit to writeoff NPLs. Also, the Ministry of Finance says that we can at most use 1% of our asset to write-off NPLs. We have to think of another way--ICBC curently has 250b (RMB) in policy loans and 160b of it is NPLs, so if the state can take it off our hands, our NPL ratio would decrease by 6%. These loans can go to policy banks and be restructured over the long-term......In 1998, MOF recapitalized the Big 4 banks with 270b, which gave them 5% capital adequacy ratio. However, with the rapid rise in deposits, the state will need to recapitalize another 400b in 2003. IPO is not an answer, since the Chinese market is not ready to raise this kind of money.... "

Again, I ask how a bank with so much self doubt just four years ago suddenly becomes the darling of the global financial market.

FB Business, Technology
ICBC share offer raises a record US$19.1b Lender prices stock at top of the range after taking HK$423.7b in retail orders
Tim LeeMaster
597 words
21 October 2006
South China Morning Post
1
English
(c) 2006 South China Morning Post Publishers Limited, Hong Kong. All rights reserved.

Industrial and Commercial Bank of China, the nation's largest bank, raised a record-breaking US$19.1 billion in the first initial public offering by a mainland company sold simultaneously on the Hong Kong and Shanghai exchanges, market sources said.

The bank sold 35.49 billion H shares, or 10.8 per cent of its enlarged share capital, for HK$3.07 each, and 13 billion A shares in Shanghai for 3.12 yuan.

The Hong Kong sale attracted US$350 billion from institutional investors, or more than 50 times the shares available. Retail investors subscribed for 78 times more shares than were on offer, placing orders worth HK$423.7 billion.

The retail demand triggered an automatic increase in the size of the retail tranche to 10 per cent of the offering from the original 5 per cent.

It also unseated Bank of China, which attracted HK$286 billion in retail orders, from the No1 spot for most-popular IPO in Hong Kong.

"You might say ICBC is the deal of the century because six months ago there were doubts the market could absorb US$20 billion of a bank without a balance sheet to speak of," said a fund manager who asked not to be identified. "It may be a better indicator of the massive liquidity, and not just mainland liquidity, and that we remain in some kind of bull market."

The pricing values the bank at 2.23 times this year's book value and two times next year's book. That is 15 per cent cheaper than China Construction Bank, which raised US$9 billion in an IPO last year, and 4 per cent cheaper than BOC, which sold shares in June.

ICBC is likely to sell an additional 5.31 billion H shares and another 1.95 billion A shares, taking the total to US$21.9 billion.

The world's largest IPO had been the US$18.3 billion share sale in 1998 by Japanese mobile phone operator NTT DoCoMo.

ICBC shares will begin trading Friday.

The lender will pay out 45 to 60 per cent of its earnings in dividends next year and in 2008. "That's almost double the competition and something we haven't seen from mainland banks," the fund manager said. "One of the hallmarks of good corporate governance is to return cash they aren't using."

China Construction Bank plans to pay out 35 per cent of its net profit in dividends while BOC proposes to pay 45 per cent over the same period.

ICBC expects its net profit to increase 26 per cent to 47 billion yuan this year and forecasts annual earnings growth of 20 per cent to 30 per cent.

Merrill Lynch, Deutsche Bank, Credit Suisse, ICEA and CICC are arranging the Hong Kong IPO.

China International Capital Corp, Citic Securities, Guotai Junan Securities and Shenyin Wanguo Securities are handling the mainland sale.

The deal puts Merrill Lynch top of the investment banking league tables for Asia outside Japan with imputed fees of US$120.9 million earned so far this year from 13 IPOs, according to Thomson Financial data. Credit Suisse will take the No2 position with US$99.4 million from seven sales while Goldman Sachs, which had held the No1 slot before the ICBC sale, will be third with US$99.3 million from 11 deals.


The Buzz
Record China IPO Could Have Been Even Bigger --- ICBC Offering Highlights Global Investors' Appetite; 'The Wall of Liquidity'
By Kate Linebaugh
743 words
21 October 2006
The Wall Street Journal
B3
English
(Copyright (c) 2006, Dow Jones & Company, Inc.)

BEIJING -- The record-breaking initial stock sale of China's biggest bank underscores how eager global investors are to write fat checks to sate the capital needs of China's companies.

The initial public offering of Industrial & Commercial Bank of China Ltd., or ICBC -- the world's biggest IPO, which will start trading Oct. 27 -- attracted $350 billion of demand from global investors, more than any other offering in Hong Kong's history. The domestic portion of the stock sale drew $80 billion. All that for a $21.9 billion deal.

But it isn't just this offering. China Merchants Bank Ltd. had $100 billion of demand for its $2.4 billion deal last month.

"I am staggered by the wall of liquidity that exists in the capital markets right now," says Steven Barg, UBS AG's head of equity capital markets for Asia. "The amount of money that has shown up for this, what it says in my mind is we are still in early days with respect to China."

China's state-owned companies have been regularly tapping international capital markets for the past decade, as Beijing has sought to fortify the balance sheets of the country's biggest companies, to improve corporate governance and transparency, and to give China's industry leaders global recognition. Since the beginning of the decade, Chinese companies have raised more than $100 billion from equity markets, according to Thomson Financial. About half of that has come in the past two years, and largely from the country's biggest banks.

Share sales by Chinese companies are also accounting for a greater share of global-equity sales -- 5.2% last year, by value, compared with 2.8% five years before, according to Thomson. This year, Chinese companies are on track to account for about 10% of the global total, surpassing the amount of equity raised by companies in the world's second-largest economy, Japan. From Chinese supermarket chains to fertilizer producers, companies haven't found any difficulty lately raising cash from international investors who are seeking ways to tap an economy growing faster than 10%.

That was certainly the case for ICBC. From Goldman Sachs Group Inc. to Hong Kong's tycoons to individual, or "retail," investors in Hong Kong and Shanghai, where the bank will list its shares, it seemed everyone wanted to grab a piece of the bank. In Hong Kong, retail investors lined up for a copy of the 671-page offering document, or prospectus.

That is, in part, because shares of its rivals -- Bank of China Ltd. and China Construction Bank Corp. -- have performed well. As the biggest bank, ICBC is likely to be included in regional stock indexes and so is all the more attractive to investors.

And bankers don't foresee a slowdown in Chinese companies coming to market, although not through deals as big as the bank offerings.

"With China's steady economic growth, China's enterprises and consumers need money," says Sherry Liu, China vice chairman of J.P. Morgan Chase & Co.

For investors, the country's banks offer broad exposure to China in a way that most other industries don't. ICBC, for instance, has a nationwide branch network of 18,000, more than any other lender. It claims 2.5 million corporate customers and 150 million personal accounts.

The euphoria helped ICBC price its offering at the high end of an indicative range. It set the share price for the Hong Kong offering at 3.07 Hong Kong dollars, or 39 U.S. cents, the top of a range that started at HK$2.56, according to a person familiar with the deal. The shares traded on the Shanghai market, which are a separate class, were set at 3.11 yuan (39 U.S. cents) apiece, according to a person familiar with the deal.

At that price level, ICBC raised US$19.07 billion in the sale, besting Japan's NTT Mobile Communications Network Inc., whose US$18.4 billion IPO in 1998 had been the biggest. The ICBC deal could still increase by 15% to US$21.9 billion if an overallotment option is exercised. Merrill Lynch & Co., Credit Suisse Group, Deutsche Bank AG, China International Capital Corp. and ICBC's investment-banking unit are managing the global offering.

I want to high-light a follow-up on Qiu Xiaohua that fellow blogger Dust sent in. Thank you Dust! Apparently, Qiu was caught in the Shanghai case....how? Well, he subtly criticized Wen's crackdown against real estate investment. Did they pay him to do that?? What is this world coming to?

A follow up!

邱晓华涉嫌严重违纪 中央纪委正对其进行审查

http://news.xinhuanet.com/politics/2006-10/19/content_5223422.htm
新华网北京１０月１９日电　国家统计局新闻发言人李晓超１９日说，有关部门在调查上海社保资金案中，发现国家统计局原局长邱晓华涉嫌严重违纪，中央纪委正在对其进行审查。

李晓超是在国务院新闻办公室举行的新闻发布会上，回答记者提问时作上述表示的。

新华社１０月１２日播发国务院任免，邱晓华的国家统计局局长职务被免去。
# posted by dust : 3:17 AM

A further clarification of the earlier post on whether to use the forex reserve domestically:

I mean that SAFE should set up another investment vehicle which "invests" in special bonds issued by the MOF. For this bond, SAFE uses dollar to pay for the bonds, but the MOF promises to pay the SAFE company back in RMB. Of course, this would introduce the sterilized money back in the economy as MOF would have to exchange the dollar it received from SAFE into RMB. However, this is different from printing money since the MOF ultimately has to use its tax base to pay back SAFE. In this way, SAFE is hedged against a declining dollar since it has RMB assets. Meanwhile, the MOF is not going to take a loss since it is spending the dollar at today's exchange rate, but repay ing in RMB with future revenue streams in exchange rates of the future.

As many of you know, China's forex reserve is surpassing the 1 trillion USD mark as we speak. There is an emerging debate, both among Western analysts and Chinese officials, about whether to spend some of the money for domestic purposes. On the one hand, since the PBOC spend considerable effort in sterilizing forex inflows with bond issuance, it would be self-defeating to then "spend" some of the money, which puts the money back into the economy. On the other hand, there are those--I guess including myself--who say that why not? Given the end of the housing bubble after Chen Liangyu's arrest, the SAFE can set up a company that buys special social security bonds from the MOF denominated in either USD or yuan. Come to think of it, why not issue a bond in which SAFE pays USD to the MOF for the bonds (which the MOF give right back to SAFE for RMB cash), but then the MOF promises to pay SAFE back in RMB. In this manner, wouldn't SAFE's portfolio be diversified and be hedged against the declining dollar? Since MOF is taking in RMB taxes, it wouldn't necessarily take a loss.


By Yanping Li
Oct. 16 (Bloomberg) -- China's foreign-exchange
reserves are not for ``spending'' on buying assets
including oil, the official Shanghai Securities News
reported, citing the Chinese central bank's Vice
Governor Wu Xiaoling.
Foreign-exchange reserves are assets on the
central bank's balance sheet, and anyone who wants to
use them ``needs to buy them'' from the People's Bank
of China, Wu told an Oct. 14 banking conference, the
paper said. China's reserves, the world's
largest, jumped 28.5 percent to $988 billion at the
end of September from a year earlier, according to
central bank data.

You know. I really wanted to not blog for a while and get some work done. God knows I have a lot of it.....but then the head of National Bureau of Statistics, Qiu Xiaohua, who was just recently appointed, suddenly disappeared from all NBS websites. There was just a short Xinhua announcement saying that he has stepped down, replaced by the vice director of State Council Development Research Center Xie Fuzhan.

As some readers might know, I had a previous posting where I PRAISED him and predicted great things for him. Well, it doesn't seem this will be the case. This came very suddenly; I am speculating that he didn't do anything too serious, but his name came up during the CDIC investigation somehow.....Someone complained, and Premier Wen had to let him go. This is similar to what happened to former Beijing mayor Meng Xuenong, who wasn't innocent, but certainly was not the only one guilty of a cover-up in 2003. There was also some speculation that Wen wasn't too happy with him for speaking out against Wen's macroeconomic restrictions. Did he get some kind of pay-off from the Shanghai Gang (kids to school??) for speaking out against the retrenchment?......that would be really strange.

Hong Kong TaKung Pao

邱晓华被突然免职非同寻常

大公报记者天文北京十三日电/今天下午，记者登陆国家统计局网站，发现网站主页上与邱晓华有关的信息已全部被删除，此前长期赫然在目的新华社记者「高度评价」邱晓华的文章，也已难见踪影。在更新日期显示为「2006-10-13 09:30:40」的局领导栏目中，「党组书记、局长」一栏的人名已更新为「谢伏瞻」。

记者随即进行电话求证，国家统计局总值班室值班人员答覆说：「不知道，请问国务院」。记者随即又拨打了国家统计局新闻发言人办公室及邱晓华秘书的电话，均无人接听。

有观察家指出，邱晓华被悄然免职，事出蹊跷。按照惯例，邱晓华是公众眼中的专家型领导，年轻有为。如被高层看中，调任地方来着意培养，一般在任免公告中会加上「另有任用」，以免公众猜测。而且往往会先就任新职，再免除旧职。在皇城根下的北京，这种正常调动的消息，一般会不胫而走。据此分析，邱晓华应不似在十七大前的人事调整格局中有所变化。对此，北京的很多消息灵通人士也不甚明了。

与国务院的一些实权部门相比，国家统计局相对弱势，给公众感觉「下水」的概率也相对小些。但今天下午有传言说，邱晓华的突然被免职，事出「严重违纪」。经本报向多个权威部门及权威人士查询，均未能证实这种说法。在今晚二十二点后，记者拨打了国家统计局总值班室的电话，就此及邱晓华是否被「双规」进行求证，答覆依旧是：「不知道」。

邱晓华离职事发非常突然。九月二十七日，他还曾赴宁波参加「第三届长三角城市统计合作与交流网络年会」。

在邱晓华短暂的七个月局长生涯中，行事主张十分引人注目，据称他对国务院领导倡导的「绿色GDP」，即建立起一个各地区、行业节能降耗的统计发布制度并不热心，认为「这在理论和实际操作方法上都有很大争议，存在很多困难」。经济界对此颇有微词。

不过国家环保总局和国家统计局还是在今年九月七日首次发布了《中国绿色国民经济核算研究报告二○○四》。由国家环保总局副局长潘岳而不是邱晓华宣布的研究结果表明，二○○四年全国因环境污染造成的经济损失为五千一百一十八亿元，占当年GDP的百分之三点零五。

值得注意的是，在宏观调控问题上，邱晓华一直认为投资增长高企不是中国经济过热的主要原因，不主张对投资进行激进的打压。在九月十二日国务院新闻办召开的新闻发布会上，邱晓华更是表示，围绕固定资产投资的宏观调控应告一段落，「已经见到积极成效，现在要抓好落实，不需要什么新的措施。」对于邱晓华的这一看法，当时很多国内经济学家均持有异议，认为投资增速回调可能是暂时的，各地潜在的投资欲望依然强烈。

邱晓华，一九五八年一月出生，福建宁化人。经济学博士。一九八二年加入中国共产党。高级统计师。一九七六年参加工作，在福建省宁化县插队；一九七八年考入厦门大学经济系计划统计专业学习，一九八二年毕业分配到国家统计局工作，先后任国家统计局国民经济综合统计司副处长、处长、见习副司长、副司长、国家统计局总经济师、新闻发言人、挂任安徽省省长助理等职。一九九九年九月任国家统计局副局长、党组成员。二○○三年七月任中共国家统计局党组副书记。二○○五年十一月任中共国家统计局党组书记；二○○六年三月任国家统计局局长。第十届全国政协委员。

The recent 6th plenum made a much smaller ideological turn than I would have expected. The announcement (below) still pays considerable homage to Jiang's "Three Represents" and "well-off society". Clearly, though, there is a gradual linguistic turn toward harmonious society. I am sure by 17th Party Congress this lingistic turn will be completed, and "Three Represents" will get little attention.

We do not know the text of Hu's own speech. They might keep it internal beause it mentions some contraversial issues. No personnel changes have been annouced, so this might mean that Han Zheng is staying until the 17th PC. It's still too early to tell though.

The announcement states that the 17th PC will take place some time in the second half of next year. Why so vague? Is a fight still expected?

Note that at the plenum, NPC Chairman and former party secretary of Shanghai Wu Bangguo was tasked with explaining harmonious society to everyone. Why Wu? Perhaps Zeng Qinghong was not alone in helping Hu Jintao dismantle the Shanghai gang....

中国共产党第十六届中央委员会第六次全体会议公报
2006年10月11日18:42 【字号 大 中 小】【留言】【论坛】【打印】【关闭】


　　新华社北京10月11日电

中国共产党第十六届中央委员会第六次全体会议公报

（2006年10月11日中国共产党第十六届中央委员会第六次全体会议通过）


　　中国共产党第十六届中央委员会第六次全体会议，于2006年10月8日至11日在北京举行。

　　出席这次全会的有，中央委员195人，候补中央委员152人。中央纪律检查委员会常务委员会委员和有关方面负责同志列席了会议。

　　全会由中央政治局主持。中央委员会总书记胡锦涛作了重要讲话。

　　全会听取和讨论了胡锦涛受中央政治局委托作的工作报告，审议通过了《中共中央关于构建社会主义和谐社会若干重大问题的决定》。吴邦国就《决定（讨论稿）》向全会作了说明。

　　全会充分肯定党的十六届五中全会以来中央政治局的工作。一致认为，中央政治局坚持以邓小平理论和“三个代表”重要思想为指导，深入贯彻党的十六大和十六届三中、四中、五中全会精神，全面贯彻落实科学发展观，团结带领全党全国各族人民紧紧抓住发展这个党执政兴国的第一要务，着力加快改革开放，着力增强自主创新能力，着力推进经济结构调整和经济增长方式转变，推动经济平稳较快发展，社会主义经济建设、政治建设、文化建设、社会建设取得新的成就，党的执政能力建设和先进性建设取得新的进步，中国特色社会主义事业取得新的进展。

　　全会全面分析了当前的形势和任务，研究了构建社会主义和谐社会的若干重大问题。一致认为，社会和谐是中国特色社会主义的本质属性，是国家富强、民族振兴、人民幸福的重要保证。构建社会主义和谐社会，是我们党以马克思列宁主义、毛泽东思想、邓小平理论和“三个代表”重要思想为指导，全面贯彻落实科学发展观，从中国特色社会主义事业总体布局和全面建设小康社会全局出发提出的重大战略任务，反映了建设富强民主文明和谐的社会主义现代化国家的内在要求，体现了全党全国各族人民的共同愿望。

　　全会指出，社会和谐是我们党不懈奋斗的目标。新中国成立后，我们党为促进社会和谐进行了艰辛探索，积累了正反两方面经验，取得了重要进展。党的十一届三中全会以后，我们党坚定不移地推进改革开放和现代化建设，积极推动经济发展和社会全面进步，为促进社会和谐进行了不懈努力。党的十六大以来，我们党对社会和谐的认识不断深化，明确了构建社会主义和谐社会在中国特色社会主义事业总体布局中的地位，作出一系列决策部署，推动和谐社会建设取得新的成效。经过长期努力，我们拥有了构建社会主义和谐社会的各种有利条件。

　　全会提出，新世纪新阶段，我们党要带领人民抓住机遇、应对挑战，把中国特色社会主义伟大事业推向前进，必须坚持以经济建设为中心，把构建社会主义和谐社会摆在更加突出的地位。

　　全会认为，目前，我国社会总体上是和谐的。但是，也存在不少影响社会和谐的矛盾和问题。人类社会总是在矛盾运动中发展进步的。构建社会主义和谐社会是一个不断化解社会矛盾的持续过程。我们要始终保持清醒头脑，居安思危，深刻认识我国发展的阶段性特征，科学分析影响社会和谐的矛盾和问题及其产生的原因，更加积极主动地正视矛盾、化解矛盾，最大限度地增加和谐因素，最大限度地减少不和谐因素，不断促进社会和谐。全党同志要坚持解放思想、实事求是、与时俱进，一切从实际出发，自觉按规律办事，立足当前、着眼长远，量力而行、尽力而为，有重点分步骤地持续推进，切实把构建社会主义和谐社会作为贯穿中国特色社会主义事业全过程的长期历史任务和全面建设小康社会的重大现实课题抓紧抓好。

　　全会强调，我们要构建的社会主义和谐社会，是在中国特色社会主义道路上，中国共产党领导全体人民共同建设、共同享有的和谐社会。必须坚持以马克思列宁主义、毛泽东思想、邓小平理论和“三个代表”重要思想为指导，坚持党的基本路线、基本纲领、基本经验，坚持以科学发展观统领经济社会发展全局，按照民主法治、公平正义、诚信友爱、充满活力、安定有序、人与自然和谐相处的总要求，以解决人民群众最关心、最直接、最现实的利益问题为重点，着力发展社会事业、促进社会公平正义、建设和谐文化、完善社会管理、增强社会创造活力，走共同富裕道路，推动社会建设与经济建设、政治建设、文化建设协调发展。

　　全会提出，到二0二0年，构建社会主义和谐社会的目标和主要任务是：社会主义民主法制更加完善，依法治国基本方略得到全面落实，人民的权益得到切实尊重和保障；城乡、区域发展差距扩大的趋势逐步扭转，合理有序的收入分配格局基本形成，家庭财产普遍增加，人民过上更加富足的生活；社会就业比较充分，覆盖城乡居民的社会保障体系基本建立；基本公共服务体系更加完备，政府管理和服务水平有较大提高；全民族的思想道德素质、科学文化素质和健康素质明显提高，良好道德风尚、和谐人际关系进一步形成；全社会创造活力显著增强，创新型国家基本建成；社会管理体系更加完善，社会秩序良好；资源利用效率显著提高，生态环境明显好转；实现全面建设惠及十几亿人口的更高水平的小康社会的目标，努力形成全体人民各尽其能、各得其所而又和谐相处的局面。

　　全会强调，构建社会主义和谐社会，要遵循以下原则：必须坚持以人为本，必须坚持科学发展，必须坚持改革开放，必须坚持民主法治，必须坚持正确处理改革发展稳定的关系，必须坚持在党的领导下全社会共同建设。

　　全会指出，社会要和谐，首先要发展，必须坚持用发展的办法解决前进中的问题，大力发展社会生产力，不断为社会和谐创造雄厚的物质基础，同时更加注重发展社会事业，推动经济社会协调发展。社会公平正义是社会和谐的基本条件，制度是社会公平正义的根本保证，必须加紧建设对保障社会公平正义具有重大作用的制度，保障人民在政治、经济、文化、社会等方面的权利和利益，引导公民依法行使权利、履行义务。建设和谐文化是构建社会主义和谐社会的重要任务，社会主义核心价值体系是建设和谐文化的根本，必须坚持马克思主义在意识形态领域的指导地位，牢牢把握社会主义先进文化的前进方向，倡导和谐理念，培育和谐精神，进一步形成全社会共同的理想信念和道德规范，打牢全党全国各族人民团结奋斗的思想道德基础。加强社会管理，维护社会稳定，是构建社会主义和谐社会的必然要求，必须创新社会管理体制，整合社会管理资源，提高社会管理水平，健全党委领导、政府负责、社会协同、公众参与的社会管理格局，在服务中实施管理，在管理中体现服务。社会主义和谐社会既是充满活力的社会，也是团结和睦的社会，必须最大限度地激发社会活力，促进政党关系、民族关系、宗教关系、阶层关系、海内外同胞关系的和谐，巩固全国各族人民的大团结，巩固海内外中华儿女的大团结。

　　全会对当前和今后一个时期构建社会主义和谐社会作出了部署。要坚持协调发展、加强社会事业建设，扎实推进社会主义新农村建设，落实区域发展总体战略，实施积极的就业政策，坚持教育优先发展，加强医疗卫生服务，加快发展文化事业和文化产业，加强环境治理保护。要加强制度建设、保障社会公平正义，完善民主权利保障制度、法律制度、司法体制机制、公共财政制度、收入分配制度、社会保障制度。要建设和谐文化、巩固社会和谐的思想道德基础，建设社会主义核心价值体系，树立社会主义荣辱观，培育文明道德风尚，营造积极健康的思想舆论氛围，广泛开展和谐创建活动。要完善社会管理、保持社会安定有序，建设服务型政府，推进社区建设，健全社会组织，统筹协调各方面利益关系，完善应急管理体制机制，加强安全生产，加强社会治安综合治理，加强国家安全工作和国防建设。要激发社会活力、增进社会团结和睦，发挥人民群众的首创精神，巩固和壮大最广泛的爱国统一战线，维护香港、澳门长期繁荣稳定，推进祖国统一大业，坚持走和平发展道路。

　　全会强调，构建社会主义和谐社会，关键在党。必须充分发挥党的领导核心作用，坚持立党为公、执政为民，以党的执政能力建设和先进性建设推动社会主义和谐社会建设，为构建社会主义和谐社会提供坚强有力的政治保证。要提高各级领导班子和领导干部领导社会主义和谐社会建设的本领，各级党委要把和谐社会建设放在全局工作的突出位置，把握方向，制定政策，整合力量，营造环境，切实担负起领导责任。要坚持和完善民主集中制，扩大党内民主，推进党务公开，严格党内生活，严肃党的纪律，增进党的团结统一，以党内和谐促进社会和谐。要建立科学高效的领导机制和工作机制，明确工作分工，搞好协调指导，增强政治敏锐性，加强对社会建设重大问题的调查研究，提高政策措施的针对性和有效性，解决好本地区本部门影响社会和谐的突出矛盾和问题。要加强基层基础工作，认真研究和把握新形势下党的群众工作的特点和规律，千方百计把群众工作做深做细做实，始终保持党同人民群众的血肉联系。要建设宏大的社会工作人才队伍。要坚持党要管党、从严治党，加强党章和法纪学习教育，加强党员干部党性锻炼和思想道德修养，健全防范腐败的体制机制，加强对领导机关和领导干部的监督，深入开展党风廉政建设和反腐败斗争，以优良的党风促政风带民风，营造和谐的党群干群关系。

　　全会审议并通过了《关于召开党的第十七次全国代表大会的决议》，决定党的十七大于2007年下半年在北京召开。这次大会，是在我国经济社会发展进入关键阶段召开的一次重要会议，对我们党团结带领全国各族人民全面建设小康社会、加快推进社会主义现代化具有十分重要的意义。

　　全会号召，全党同志要紧密团结在以胡锦涛同志为总书记的党中央周围，高举邓小平理论和“三个代表”重要思想伟大旗帜，全面贯彻落实科学发展观，带领全国各族人民万众一心、锐意进取，为把我国建设成为富强民主文明和谐的社会主义现代化国家而奋斗！

A new South China Morning Post analyzing the current situation given the purge of Chen. I generally agree with this article, but I think Wang Lequan will also be an important player.

Monday, October 9, 2006
New doctrine is crucial for Hu

WANG XIANGWEI in Beijing

As more than 300 members of the Communist Party's elite central committee began

their annual, four-day, closed-door session in Beijing yesterday, their main agenda

was, as had been announced, to discuss ways of "building a harmonious socialist

society".

This benign-sounding subject belies heavy political undertones and far-reaching

implications for the leadership of President Hu Jintao and the future direction of

the Communist Party as well as the mainland's growth pattern.

The meeting is crucial to Mr Hu's leadership and his place in history as he moulds

his legacy less than two years after gaining absolute power.

The officials, huddling in the military-run Jingxi Hotel in Beijing's western

suburbs, are expected to approve a policy blueprint elevating Mr Hu's "harmonious

society" slogan to official theory.

The new doctrine will boost Mr Hu's authority and herald another drive to shore up

the Communist Party's claim to legitimacy, which has been greatly undermined by the

collapse of Marxist ideology and the emergence of murkier aspects of the economy

marked by rampant official corruption, a widening wealth gap and simmering public

unrest.

At the meeting Mr Hu will face minimal resistance in pushing through his policy

agenda and setting a new direction for party policy, particularly after his recent

decision to sack Chen Liangyu , the powerful party boss in Shanghai. That dealt a

crushing blow to his main political rivals, the Shanghai clique led by his

predecessor Jiang Zemin , of which Mr Chen was a key member.

The meeting is also expected to authorise the 17th party congress, probably in

autumn next year, when a new generation of leaders, including Mr Hu's anointed

successors, will be elected. It marks the start of a long run of intense politicking

and jockeying for power.

While it is far too early to pinpoint winners and losers, the broad contours of a

power shake-up are emerging, with signs that Mr Hu, Vice-President Zeng Qinghong and

Premier Wen Jiabao will have the most say in deciding a new line-up of officials at

the congress next year.

This means the further rise of officials from the Communist Youth League, Mr Hu's

power base, and those from the loose group of so-called "princelings" - children of

communist veterans - such as Mr Zeng, against the backdrop of the irreversible

decline of the Shanghai clique.

So what is Mr Hu's theory of "building a harmonious society" all about?

The catch-all phrase covers Mr Hu's efforts to spread wealth and narrow the

mainland's income gap by rectifying the economic excesses of the past 20 years and

abandoning Mr Jiang's so-called elitist policy approach, which favoured faster

economic growth, entrepreneurs and powerful business interest groups.

Cheng Li, a New York-based expert on mainland politics, said in his latest report on

the leadership changes that Mr Hu's populist initiatives had already begun to change

the country's course of development, from obsession with economic growth to a more

sustainable growth model with better pollution controls and less energy consumption;

from an excessive focus on urban construction, foreign investment and foreign trade

to a greater concern for rural advancement and the stimulation of domestic demand;

from a single-minded emphasis on coastal development to a more balanced regional

development approach.

Over the past few days, the official media has begun to run a series of articles

hailing Mr Hu's "harmonious society" push as a theoretical breakthrough and the

guiding light for the country in the years ahead.

But Mr Hu's decision to preach the wisdom of harmony comes at a critical juncture,

with the Communist Party's legitimacy in greater peril than ever.

For the leadership, China is faced with similar, if not more serious, conditions

than those that led to the massive pro-democracy rallies and the subsequent bloody

crackdown of June 1989. Those included rampant official corruption, growing social

unrest, widening income gaps, serious environmental degradation, soaring

unemployment, worsening law and order, and failed reforms in housing, medical care

and education.

To provide theoretical backing for Mr Hu's theory, Xinhua reported at the weekend

that Mr Hu had sent dozens of teams to Europe, the US, Latin America, other East

Asian countries and Africa to conduct research on a wide range of social issues,

from labour relations to social welfare.

In a separate report on Saturday, Xinhua said Mr Hu's theory had benefited

particularly from the formulas of the long-successful democratic socialist parties

in Nordic countries such as Norway and Sweden, particularly in the area of social

welfare.

This has given rise to hopes that Mr Hu intends to transform the Communist Party

along the lines of the European socialist parties to maintain its legitimacy.

Some party academics have already urged the party to move away from its 20-year-old

dictum of highlighting economic development as the core of the party's guiding

policies.

Instead, the party and the government should focus on providing public

administration and public services, allowing market forces to play a dominant role

in economic development, they said.

But when Mr Hu first put forward the theory in February last year, he faced strong

resistance from within the party and was virtually forced to refrain from mentioning

"harmony" for nearly 10 months, according to sources close to the party's inner

circle.

The resistance came from the supporters of Mr Jiang, powerful local officials and

business groups thought to have colluded with corrupt officials to profit handsomely

from faster economic growth.

They also put up similar resistance to central government demands since 2004 to rein

in property speculation and overall economic growth to prevent overheating.

Mr Chen reportedly clashed openly with Mr Wen over the central government's

macroeconomic controls.

It was in this context that Mr Hu launched an anti-corruption campaign this summer

to consolidate his power and remove political opposition to his policy agenda.

Since then, there have been arrests of high-ranking officials and well-connected

businessmen in Beijing, Tianjin , Fujian , Anhui and Hunan , culminating in the

downfall of Mr Chen, the most powerful official removed from office in a decade.

As the investigation widens, many party officials and analysts believe Mr Hu is

stepping up pressure on two members of the Politburo Standing Committee, Jia Qinglin

and Huang Ju , to take responsibility for corruption in Beijing and Fujian, where Mr

Jia used to be party chief, and in Shanghai, where Mr Huang was also party chief.

However, party officials said Mr Hu was very unlikely to force Mr Jia and Mr Huang

to step aside at this week's meeting.

"The pressure is aimed at ensuring the two step down quietly at the 17th congress

next year, leaving them with little in the way of bargaining chips to influence the

new line-up of officials," one party source said.

The sacking of Mr Chen has intensified speculation about the reshuffling of the

Politburo and its nine-member standing committee at the 17th congress, even though

it is still about one year away.

Changes in the two powerful bodies and the larger central committee may be less

sweeping than those at the 16th party congress in 2002, when there was a

generational power transition, but there may still be major reshuffles.

Many party officials now believe Mr Jia and Mr Huang are most likely to step down.

And two more standing committee members are also likely to retire because of age.

While there is no official retirement age for Politburo and standing committee

members, the agreed norm appears to be 70.

Luo Gan will be 72 next year and Wu Guanzheng , chairman of the Central Commission

for Discipline Inspection, will turn 69.

Of the five other standing committee members, there is little doubt that President

Hu and Mr Wen will keep their posts after the 17th congress. So will Li Changchun ,

China's propaganda tsar and the youngest standing committee member, who turns 63

next year. Wu Bangguo , chairman of the National People's Congress, and Vice-

President Zeng are also likely to remain, although Mr Zeng will be 68 by the time of

the congress.

At the Politburo level, Vice-Premiers Wu Yi and Zeng Peiyan will be 69 and are also

expected to step down.

At the central committee level, where the mandatory retirement age is 65 for

provincial party secretaries, governors and ministers, there is expected to be a

major intake of younger "fifth-generation leaders" in their 50s, with several of the

most prominent ones likely to be inducted into the Politburo.

Following Mr Hu's anti-corruption campaign to remove political opposition, the

general view is that he will now have a much freer hand in promoting his supporters

and protégés from the Communist Youth League to important positions in the national

and regional leadership, which would help in carrying out his populist policies.

However, Mr Hu will have to be prepared for intensive horse-trading with other

kingmakers - Mr Zeng in particular - in the months to come.

The overseas media has long associated Mr Zeng with the Shanghai faction and Mr

Jiang. But the reality is that Mr Zeng has already become a formidable force in his

own right, independent of the Shanghai faction, not least because as a princeling he

has maintained close ties to the children of other communist veterans - many of whom

are generals in the People's Liberation Army.

Mr Zeng reportedly played a pivotal role in helping Mr Hu to force Mr Jiang to

relinquish his last post as the chairman of the Central Military Commission.

Some overseas media have even singled him out as the key figure involved in

engineering the downfall of the Shanghai party boss.

But many party officials are sceptical. The anti-corruption probe that brought down

Mr Chen was handled by investigators from the Central Commission for Discipline

Inspection, and commission chairman Mr Wu, a strong ally of Mr Hu, was unlikely to

have answered to Mr Zeng. They believe a more likely scenario was that Mr Wu led the

investigation with Mr Hu's full support.

Although party officials said Mr Hu and other top leaders had not agreed on choices

for vacant seats on the Politburo and its standing committee, the smart money is

already on certain officials.

Current Politburo members Liu Yunshan , the head of the party's propaganda

department, Hubei party secretary Yu Zhengsheng , He Guoqiang , the head of the

party's organisation department, and Public Security Minister Zhou Yongkang are

strong contenders for the vacant seats on the standing committee. Guangdong party

secretary Zhang Dejiang and Beijing party secretary Liu Qi also deserve mention.

Prominent fifth-generation leaders with a good chance of getting into the Politburo

are likely to include Liaoning party secretary Li Keqiang and Jiangsu party

secretary Li Yuanchao - both of whom are close allies of Mr Hu - Commerce Minister

Bo Xilai , Zhejiang party secretary Xi Jinping , Beijing Mayor Wang Qishan , the

minister of the National Development and Reform Commission, Ma Kai , and People's

Bank of China governor Zhou Xiaochuan .

Finally, it is widely expected that Mr Hu will anoint his own successor, who will

take over at the 18th congress in 2012, by promoting a fifth-generation leader to

the Politburo standing committee at the 17th congress. If so, Li Keqiang is the man

to watch.

This is the latest on the Chen LIangyu case from the NYT. The piece claims that Zeng Qinghong, former vice secretary of Shanghai and Jiang's long-time right-hand man, was responsible for launching the Chen Liangyu investigation. If this is true, it would be the height of Machiavellian politics in China. Zeng Qinghong had handpicked Chen Liangyu for senior positions in the Shanghai government after Chen had served a stint with Zeng at the Shanghai Veteran Cadre Bureau.

I guess this kind of makes sense since Zeng still has plenty of connections in the PLA and in the internal security apparatus through the princeling network. He didn't lose his entire powerbase by betraying the Shanghai Gang. Meanwhile, he can earn major credit with Hu Jintao because Shanghai had long been a thorn on Hu's side, as well as Wen's. Well, we will see whether this claim is true at the 17th Party Congress. If Zeng is indeed behind the crackdown on Shanghai, he will ask for something substantial at the 17th Party Congress, either another term for him at the Standing Committee or the CMC, or both ideally. At the very minimum, he will demand that Zhou Yongkang be promoted to the Standing Committee and replace Luo Gan as the head of the Law and Politics Committee. If I am Hu, I would be very careful about what I give Zeng, and if I am one of Zeng's followers, I would start finding another master.

"In Graft Inquiry, Chinese See a Shake-Up Coming"
By Joseph Kahn, NYT, October 4, 2006

BEIJING, Oct. 3 - When Shanghai's party boss was detained in an
anticorruption probe last week, Chinese were rattled by news of the first
purge of a high-ranking Communist Party leader since 1995. But the
investigation's scope and its ultimate goals are wider, as the party's two
most powerful officials aim to shake up the leadership and wipe out
resistance to their policy agenda, party officials and analysts say.

The investigation, the largest of its kind since China first pursued
market-style changes to its economy more than a quarter-century ago, was
planned and supervised by Zeng Qinghong, China's vice president and the
day-to-day manager of Communist Party affairs, people informed about the
operation said.

They said Mr. Zeng had used the investigation to force provincial leaders
to heed Beijing's economic directives, sideline officials loyal to the
former top leader, Jiang Zemin, and strengthen Mr. Zeng's own hand as well
as that of his current master, President Hu Jintao.

Aside from frightening officials who have grown accustomed to increasingly
conspicuous corruption in recent years, the crackdown could give Mr. Hu
greater leeway to carry out his agenda for broader welfare benefits and
stronger pollution controls, which may prove popular in China today.

Some critics fear that it may also consolidate greater power in the hands
of a leader who has consistently sought to restrict the news media, censor
the Web and punish peaceful political dissent.

The high-level purge began on Sept. 25, when Chen Liangyu, the Shanghai
party leader and a Politburo member, was removed from his office on
corruption charges. Party security forces had already detained
high-ranking officials in Shanghai, Beijing, Tianjin, Fujian and Hunan.
Mr. Chen is the most powerful person removed from office since 1995, when
the Beijing party leader was purged, also on corruption charges, during a
power struggle.

Several party officials and well-informed political observers said they
believed that the investigation had not yet reached its climax. They say
Mr. Zeng hopes to dismiss two fellow members of the Politburo Standing
Committee, Jia Qinglin and Huang Ju, who are under pressure to take
"political responsibility" for corruption that has occurred in Beijing and
Shanghai, their respective areas of influence.

If he succeeds in removing officials who serve on the nine-member Standing
Committee, the party's top leadership, the purge will amount to the
biggest political shake-up since 1989, when Deng Xiaoping ousted Zhao
Ziyang, then the party's general secretary, after the crackdown on
democracy protests in Beijing.

It would also be likely to seal Mr. Zeng's reputation as China's political
mastermind, who mixes personal ambition with a nearly legendary ability to
deliver results for his superiors. Officially ranked No. 5 in the party
hierarchy, he is widely seen as exercising more authority within the party
than anyone except Mr. Hu.

Chinese politicking takes place under a heavy veil of secrecy, and
speculation about what happens in Zhongnanhai, the Chinese leadership
compound, has been intense since Mr. Chen's detention last week.

It is rarely possible to get authoritative confirmation of political
maneuvers in China. The people who discussed the situation with a foreign
reporter did so on condition of anonymity, citing fears of retribution.

The course of the anticorruption campaign may shift if central leaders
face a strong backlash at the party's s annual Central Committee meeting,
which will be held Oct. 8-11. One well-placed political observer said he
doubted that Mr. Huang or Mr. Jia would be forced from office before their
expected retirement next year.

Even so, the weakened position of the two men and their patron, Mr. Jiang,
whom Mr. Hu and Mr. Zeng pushed from his last post in 2004, could have a
significant impact on Chinese policy and leadership decisions.

Mr. Jiang's old loyalists, often referred to as the Shanghai faction,
tended to favor fast economic growth, a relatively high degree of
provincial autonomy in economic affairs, loose controls on investment and
bank lending and close ties between the party and the country's rising
class of private businessmen.

Mr. Hu, 63, and Mr. Zeng, 67, have at least for now forged an alliance
that dominates party leadership, party officials say. They advocate slower
and more stable growth, greater attention to social inequality and
pollution, and an expansion of state support for education, medical care
and social security.

Most of the officials singled out so far in the anticorruption sweep are
seen as closer to Mr. Jiang and as having ignored central directives to
tamp down state-led investment. That, party officials say, shows that the
continuing legal investigation serves as a cover for a political campaign
to change the party's policy direction.

Mr. Zeng plans to use the Central Committee meeting to elevate Mr. Hu's
political slogan, "harmonious society," into an official "theory."

The catch phrase covers a range of policies intended to restore a balance
between the country's thriving market economy and its neglected socialist
ideology, primarily by paying greater attention to peasants and migrant
workers who have benefited much less than the white-collar elite in China's
long economic boom.

At the meeting, party leaders will discuss "the theory of building a
harmonious socialist society," party officials said. In effect, Mr. Zeng
is promoting Mr. Hu's concept into doctrine, to be taught alongside the
theories of Mao, Deng and Mr. Jiang.

People informed about Mr. Zeng's planning described that step and others
as part of a carefully calculated series of political moves that began
last spring.

They said Mr. Zeng had instructed the inspectors responsible for enforcing
party discipline to investigate activities in the political strongholds of
Beijing, Shanghai and Tianjin, where he suspected that senior party
officials were allowing rampant profiteering by relatives and friends, and
where the leaders owed their positions mainly to Mr. Jiang.

Those urban enclaves, whose leaders enjoy considerable autonomy, had also
defied repeated efforts by Mr. Hu and Wen Jiabao, the prime minister, to
rein in bank lending in overheated sectors like real estate.

Anticipating that Mr. Jiang might seek to protect his allies, Mr. Zeng
first moved to mollify him by rolling out a tribute: the publication of
his collected works. Party units nationwide were instructed to purchase
and study the three-volume collection of speeches and essays, a financial
and political windfall.

The crackdown initially focused on lower-level officials in the big
cities. When investigators gathered evidence to implicate Mr. Chen, the
Shanghai party boss, Mr. Zeng summoned him to Beijing, presented him with
the pending indictment and pressed him to resign, these people said. He
was said to have refused.

Faced with the prospect of a hostile purge, the first of its kind
affecting a Politburo member since 1995, Mr. Zeng and Mr. Hu sent Mr.
Chen's file to Mr. Jiang, asking for his advice, a person close to Mr.
Zeng's office said.

Confronted with evidence of high-level corruption in Shanghai, Mr. Jiang
approved removing Mr. Chen, the people said.

Armed with that victory, Mr. Zeng has pushed to create a new standard of
"political responsibility," modeled after a code seen by him to prevail in
American politics, which holds senior leaders responsible if their
underlings disgrace the party, people informed about his thinking said.

That new standard could be used against Mr. Huang, a former Shanghai party
boss and a Jiang loyalist, and Mr. Jia, who supervised Beijing.

"The old standard for senior party members was legal guilt," said one
person who spoke about Mr. Zeng's thinking." "Under the new standard you
could lose your post for mismanagement even if they can't prove you put
one cent in your own pocket."

Others raised doubts that the purge would reach people that high up the
hierarchy. The ruling party risks undermining its own authority if it
acknowledges that corruption extends into the most elite ruling circle,
they said.

More generally, Mr. Zeng's prominent role has raised questions about his
influence relative to Mr. Hu's, party officials said.

Mr. Hu holds the posts of party general secretary, head of the military
and president of China, the country's three most important. Mr. Zeng,
though he runs the party's main coordinating office, is outranked in its
official hierarchy not only by Mr. Hu but also by three other Standing
Committee members.

Moreover, until Mr. Hu and Mr. Zeng unexpectedly joined forces in 2004 to
push Mr. Jiang into full retirement, Mr. Zeng was seen as close to Mr.
Jiang. The two worked side by side since they served in Shanghai together
in the 1980's.

But Mr. Zeng's campaign to remove some Jiang loyalists may end up
strengthening his own hand as well as Mr. Hu's, some some party officials
suggested. The reason is that Mr. Zeng has become the standard-bearer for
a wide array of political interests.

The son of one of Mao's first security chiefs, Mr. Zeng maintains close
ties to the sons and daughters of Communist China's founding fathers and
has relatives in the military. He has supporters among those who favor
deeper capitalist-style changes to the economy and financial system.

Some Chinese intellectuals say he has signaled an openness to political
change. Mr. Hu, in contrast, is viewed as cautious and doctrinaire.

Mr. Hu has sought to promote officials he trusts from his days as a
provincial official in western China and as the head of the national
Communist Youth League in the 1980's. Though he now has broad authority,
his traditional base is considered narrower and less influential than that
of Mr. Zeng.

The political dance between the men underlines uncertainties about the
political succession scheduled to take place in 2007. At that time the
party will hold a congress, as it does every five years, to approve a new
lineup of officials for the Politburo as well as other top party,
government and provincial positions.

Party officials say that while Mr. Hu and Mr. Zeng have worked together to
consolidate their own power, they have not agreed on choices for the
Standing Committee or some top provincial posts. That suggests that their
alliance possibly temporary and that the country's politics could remain
volatile.

"I think that at this point neither of them has the power to dictate the
future," one party official said. "They need each other, but that does
not mean they trust each other."


Copyright 2006 The New York Time