Wednesday, August 29, 2007

Well, the game is on, October 15th!

17th CPC National Congress proposed to convene in mid October
www.chinaview.cn 2007-08-28 19:25:10 Print

BEIJING, Aug. 28 (Xinhua) -- The 17th National Congress of the Communist Party of China (CPC) is proposed to convene in Beijing as of Oct. 15 this year.

The Political Bureau of the CPC Central Committee decided at a meeting on Tuesday to make the proposal to the 7th Plenum of the 16th CPC Central Committee.

The meeting also decided that the 7th Plenum of the 16th CPC Central Committee will be held here on Oct. 9.

The Tuesday's meeting, presided over by Hu Jintao, general secretary of the CPC Central Committee, also studied the preparatory work for these two meetings of the Party to be held in October.

The meeting said that the 17th CPC National Congress is a very important meeting to be held at a time when China has entered a key stage of reform and development.

The congress will hold high the banner of socialism with Chinese characteristics, be guided with Deng Xiaoping Theory and the important thoughts of "Three Represents", and thoroughly carry out the scientific concept of development.

The congress will review the Party's work in the past five years since its 16th National Congress, and summarize the precious experience the Party has gained from the historic process of uniting and leading people of all ethnic groups for building socialism with Chinese characteristics since the beginning of reform and opening up, according to the meeting.

The congress is also expected to make strategic arrangements for the overall advancement of China's reform and opening up and socialist modernization drive, as well as for the overall advancement of the grand project of Party building.

The congress will further mobilize the entire Party and the people of all ethnic groups to emancipate their minds, stick to the reform and opening up, advance scientific development, promote social harmony and strive together for a new victory over the building of a well-off society in an all-round way and the new development of building socialism with Chinese characteristics.

A new CPC Central Committee and a new Central Commission for Discipline Inspection will be elected at the congress.

All preparatory work for the congress is progressing smoothly at present and preparations should be continued earnestly to ensure the successful congress, according to the meeting.

The meeting approved the draft work report by the Central Commission for Discipline Inspection to the Party's 17th national congress will be submitted to the 7th Plenum of the 16th CPC Central Committee for discussion.

The Party's national congress is held every five years. Hu Jintao was elected general secretary of the CPC Central Committee at the 16th CPC National Congress in 2002.

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Tuesday, August 28, 2007

So the big news today was the rotation of Minister of Finance Jin Renqing to head the Development Research Center of the State Council. Despite the rumors, I am not entirely convinced that this was politically tinged. When I was last in Beijing in June, I heard from MOF officials then that Jin was going to step down soon as part of a regular rotation because he had served one full term and at the age of 63 cannot serve another full term as a minister. For the sake of work flow, often such a person is rotated to a non-strategic job like DRC to serve until the retirement at 65. I also heard in June that Xie Xuren was the leading candidate for the MOF job. If it's tied to a corruption scandal, I think he would have been "shuanggui"ed immediately. He had long been known as a technocrat with cordial, but not intimate, relationships with top leaders, so he could have been removed quite easily, just as Qiu Xiaohua was removed.

FT News, Education

Finance chief replaced amid sex scandal
Staff Reporters
365 words
29 August 2007
South China Morning Post
(c) 2007 South China Morning Post Publishers Limited, Hong Kong. All rights

Finance Minister Jin Renqing has been replaced abruptly after a sex scandal
snowballed to implicate several senior mainland officials, sources said.

Mr Jin had been shifted to a government think-tank and would be replaced by Xie
Xuren , director of the State Administration of Taxation, Reuters reported,
citing an announcement by the Communist Party's Organisation Department.

Its report did not give any specific reasons why Mr Jin, 63, had been
transferred to the Development Research Centre. But sources said there had been
intense speculation about the minister's career after the mainland leadership
said it was stepping up investigation of a corruption case involving Du
Shicheng, the former party secretary of Qingdao , a booming coastal city which
will host the sailing events of the 2008 Olympic Games.

In December, Mr Du was fired from his government and party posts for "serious
breaches of discipline", the party's euphemism to describe corruption and moral
lapses including keeping mistresses.

As the party's anti-corruption watchdog, the Central Commission for Discipline
Inspection, continued its investigation, it also detained a young woman
believed to have had an intimate relationship with Mr Du.

To the shock of anti-graft officials, the woman, known as a social butterfly,
later confessed she had also had intimate relationships with several senior
government officials and some of them had abused their power to advance her
business dealings.

In June, Chen Tonghai, chairman of oil giant China Petroleum & Chemical Corp
(Sinopec), was detained for corruption. Sources said the woman's confession had
prompted anti-graft officials to launch an investigation of Mr Chen but that
they focused their investigation on economic irregularities involving Mr Chen
but unrelated to the woman's case.

The woman was also believed to have implicated Mr Jin and several other senior
government officials who have important roles advising on foreign and domestic

The keeping of mistresses and dalliances with young women have been among the
main reasons for the recent sackings of senior officials.

State media has reported that the majority of government officials arrested for
corruption were accused of keeping young women as mistresses.

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Monday, August 13, 2007

More on elite politics. This piece makes a very good point, although You Xigui is way past the retirement age of 65. I think You would have had to retire either way. Jiang Mianheng, on the other hand, was left out for definite political reason. This reminds me that I have to plough through the list for clues about the 17th Party Congress.....

China's ex-president Jiang suffers political blow

By Benjamin Kang Lim

BEIJING, Aug 13 (Reuters) - Former Chinese president Jiang
Zemin suffered a political blow when his son and security
chief were left out of the running for seats in the Communist
Party Central Committee, sources with ties to the leadership

The setback, coupled with the arrest of a former secretary to
a late vice premier and a son of Shanghai's disgraced party boss,
strengthened the hand of incumbent President Hu Jintao ahead of
the party's five-yearly 17th congress in the autumn.

Jiang Mianheng, a vice president of the Chinese Academy of
Sciences, and You Xigui, director of the party's Bodyguards
Bureau, lost in Central Committee straw votes earlier this year,
said the sources who requested anonymity.

"The elections were internal to sound out party members. The
two men were unpopular with the masses," one source told Reuters.

The pair were not among 2,217 delegates to the 17th congress,
and therefore cannot run for seats in the elite Central
Committee, which has 198 full and 158 alternate members.

You is currently an alternate member. The Bodyguards Bureau
provides incumbent and retired leaders with security personnel
and is one of the country's most politically sensitive jobs.

The bad news for Jiang Zemin was good news for Hu, who has
yet to fully consolidate power and shake off his predecessor's
waning influence.


"It's a sign You Xigui cannot stand for election to the
Central Committee and is unlikely to stay on as director of the
Bodyguards Bureau after the 17th congress," said Zhang Zuhua, a
former party insider.

Jiang had used his residual influence earlier this year to
force Hu to keep You on as chief bodyguard. At 68, You is past
the compulsory retirement age of 65 for a three-star general.

Analysts said the political jockeying was unlikely to worsen
into a showdown, as the world's fourth-largest economy attempts a
delicate soft landing from dizzying economic growth.

Hu, 64, replaced Jiang, 81, as party boss in 2002, state
president in 2003 and military chief in 2004, completing the
country's first smooth generational leadership change since the
1949 Communist revolution.

In another sign Hu has grown in strength, Wang Weigong, a
former secretary to late Vice Premier Huang Ju, was investigated
for serious breaches of discipline. Huang, who ranked sixth in
the party hierarchy, died in June.

The probe appeared to be an extension of a corruption inquiry
that has toppled Chen Liangyu as party boss of Shanghai --
Jiang's political bailiwick.

Chen, the first Politburo member to be purged in 12 years,
and a dozen officials and businessmen have been accused of
misusing the city's pension funds.

In an indication of the limits to Hu's power, it took him 11
months to expel Chen from the party, compared with four months
Jiang took to purge his main political rival in 1995.

Huang and Chen belonged to a network of Shanghai officials
who owe their rise to Jiang, who was the mayor and later party
boss of the city in the 1980s. They were widely reputed to be at
odds with Hu over policy and influence.

The Hong Kong-based Yazhou Zhoukan weekly magazine said
Chen's son, Chen Weili, was arrested in Malaysia and repatriated
-- a blow to Jiang and his men.

你好,看了你的博客,我可以从你们的视角了解了对中国的看法。我是中国大学一名国际政治专业的研究生,what i want to say is you donn't know a real China.Maybe i can talk more with you about China and Chinese people.
My name is Wang Xuanhua
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Thursday, August 09, 2007

Man, I was not going to write a blog on this, but it is simply too ludicrous. So, CCB wants to list in Shanghai, great. Among the chosen underwriters, CINDA ASSET MANAGEMENT COMPANY!!! If only readers out there know as much about AMCs as I do (and some of you know much more!), you would know how ridiculous such an idea is, especially at the local level. But the MOF, which "owns" the AMCs, wants to turn them into comprehensive financial conglomerates, so CCB (through Huijin) was pressured into picking Cinda as one of the underwriters. As the article intimates, many people are pretty pissed off about that, especially the veterans in the CSRC. Well, I guess Cinda needs "practice" for its future role as an investment bank. Alright, I'll tell you what this whole thing is really about. Basically, MOF officials have been jealous for years that they don't have lucrative mid-career breaks that many in CSRC, CBRC, CIRC, and PBOC have enjoyed for years. Officials in these agencies have routinely rotated to board or manager positions in banks and securities companies, which pay much higher than civil service salaries. Some stay, while others return to the government much richer. Meanwhile, poor MOF officials don't have these opportunities and cannot even afford those pricey Beijing apartments. Solution: let's form a bunch of "investment banks" so that our guys can circulate through them in mid-career....well, who am I to judge. It is "working" well for the PBOC and CSRC.

Top IPO Market: China?

It's Possible as CCB
Sets Shanghai Debut;
U.S. May Be Eclipsed

August 9, 2007

BEIJING -- China Construction Bank Corp. hired three domestic underwriters for its expected $6.5 billion Shanghai initial public offering, a person close to the deal said, putting China on track to challenge the U.S. as the largest IPO market this year.

The Chinese state bank mandated China International Capital Corp., Citic Securities Co. and China Cinda Asset Management Corp. to underwrite the sale of as many as nine billion Class A shares, the person said, as the lender prepares to list shares in the coming months.

The offering by China Construction Bank, which piloted China's listing of its Big Four banks by selling $9.2 billion in shares in Hong Kong in October 2005, is another sign of the growing importance of China's domestic capital markets globally.

Chinese issuers raised $24.2 billion from January to July this year via IPOs, accounting for 13.8% of global IPO proceeds and second only to the U.S.'s $26.9 billion over the same period, according to data from Thomson Financial. Of the total issued by Chinese firms, $20.6 billion was raised in the domestic Class A-share market.

China could surpass the U.S. in coming months as a string of large IPOs, including oil firm PetroChina Co. and coal producer China Shenhua Energy Co., are slated for this year.

China Construction Bank's offering could top rival Industrial & Commercial Bank of China Ltd.'s $5.9 billion sale of Class A shares in October last year for the largest domestic offering to date. Bank of America Corp.'s 8.52% stake in China Construction Bank likely will be diluted by the offering.

While the bank's selection of CICC and Citic Securities, considered top-tier domestic investment banks, to underwrite the sale was expected, its choice of Cinda was a surprise. The asset-management firm, which has specialized in handling nonperforming loans and hasn't underwritten a large IPO before, could get a boost in its ambition to become more active in the securities industry.

Cinda's selection may be due to its close historical ties to China Construction Bank. Cinda was created in 1999 to dispose of China Construction Bank's nonperforming loans.

The person close to the deal said it is possible Cinda could be dropped from the IPO because China has strict securities regulations on related parties underwriting IPOs.

Write to Rick Carew at rick.carew@dowjones.com

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Saturday, August 04, 2007

Will the saga ever end? Even after Chen Liangyu's expulsion from the CCP, the press reports a new arrest in the Shanghai social security case. The former personal secretary of deceased Vice Premier Huang Ju--Wang Weigong-- was just arrested for involvement in the social security scandal. Interestingly, Takungpao, a Hong Kong based pro-CCP newspaper, immediately published an article stating that Huang Ju had denounced Wang to the Central Committee before his death. Clearly some fast thinking Jiang faction member ordered Takungpao to issue the story to prevent Wang's arrest from implicating Huang Ju. In a way, Huang is still very much at the heart of the factional game even after his death. If Huang Ju is implicated posthumously, the Shanghai gang would not have much of a leg to stand on and would have to cave into the demands of Hu Jintao. As long as he remains unsullied, they can at least bargain for some concessions from Hu. But will Hu take the next step to implicate Huang Ju and his family? If he is confident of his control over the military, he may take the next step, but Zhou Yongkang has been busy gathering evidence against Hu as well, so we'll see.......

China arrest takes scandal into politburo
Financial Times
By Richard McGregor in Beijing

Published: August 3 2007 18:01 | Last updated: August 3 2007 18:01

The former political secretary to a member of China's politburo has been detained in a widening probe over misuse of Shanghai's pension funds, elevating the scandal for the first time into the inner-circle of the Chinese leadership.

The detention of Wang Weigong, reported by a Chinese financial magazine on Friday, comes ahead of the five-yearly Communist party congress in October, which will choose the country's senior leadership until 2012.

Mr Wang had headed the office in Beijing of Huang Ju, who until his death earlier this year was the fifth-ranked member of the nine-member politburo standing committee, China's elite leadership group.

Before moving to Beijing in 2002, Mr Huang was the mayor and then party secretary of Shanghai. Mr Wang worked for him in both capacities.

The scandal has already led to the arrest and expulsion from the party of Chen Liangyu, the former Shanghai party secretary and the highest ranking official to be toppled for corruption in a decade.

In line with disciplinary practices, the party investigates and passes judgment on officials detained for corruption before handing them over to the criminal justice system, which ritually tries and then sentences them.

The latest arrest gives further weight to the conventional explanation of the unfolding scandal, which is regarded as an effort by Hu Jintao, the president, to take down the once dominant "Shanghai gang".

Jiang Zemin, Mr Hu's predecessor, hailed from Shanghai and surrounded himself in Beijing with officials trained in the city. Mr Hu has an entirely different power base.

Shanghai officials have sought to play down the implications of the purge of more than a dozen former top officials from the city over the past year. A retired senior Shanghai official said that the central government had singled out the city only because Mr Chen's behaviour had been so blatant.

"This is not about Shanghai, but about sending a message to other cities, where there are similar problems," said the official. He said that Mr Jiang had helped to initiate the investigation into Mr Chen.

The party congress will usher in a new leadership team, both in the politburo and also among the four vice-premiers, which are key day-to-day policymaking posts for the economy.

Although there are a number of favoured candidates for promotion into the new leadership group, the outlines of Mr Hu's new team are not yet clear.

The scandal, plus the leaking to a Beijing-backed newspaper in Hong Kong last week of details of Mr Chen's crimes, is a sign that the struggle over the new line-up is intensifying.

Copyright The Financial Times Limited 2007

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Thursday, August 02, 2007

Interesting article, essentially, the Blackstone deal is causing a lot of controversies now because the shares of Blackstone (BX) has declined substantially since listing, so the Chinese foreign exchange reserve has lost like 500 million USD. Well, perhaps this political pressure will prompt (is already prompting) the government to intervene to support the stock more actively through it myriad subsidiaries.......full disclosure, I just bought some BX....

China faces public backlash as Blackstone investment backfires
By Keith Bradsher
Published: August 2, 2007

HONG KONG: The first purchase by the Chinese government's new overseas investment fund, a $3 billion stake in the Blackstone Group, has backfired badly and produced an unusual public backlash within China.

Blackstone shares have fallen steeply since the company went public June 22, pushing down the value of the government's investment by more than $500 million in just six weeks. Bloggers and even some Chinese financial media have frequently mentioned the dwindling value of the government's stake, and some have been highly critical.

"O senior officials of the Chinese government, please do not be fooled by sweet-talking wolves dressed in human skin," said one of several Internet postings compiled by an anonymous blogger on Sina.com, a Chinese Web site. "The foreign reserves are the product of the sweat and blood of the people of China, please invest them with more care!"

In a sign that the Chinese government may be censoring criticism on the sensitive issue of government investment losses, the blogger's entry was visible on the Web site on Thursday afternoon but had disappeared by Thursday night. Other entries by the same blogger were blocked, but milder criticisms of the Blackstone investment could still be found.

"It is really alarming the speed with which the Chinese government entered into this investment," said another posting, signed as "anonymous person 586215," that remained on Sina.com through Thursday night.

For many years, China's central bank followed the example of most central banks by investing the bulk of its assets in Treasury bonds and other government bonds. But as China's foreign reserves have soared to $1.3 trillion, the government has started chasing higher returns - and is now learning that this involves greater risk and sometimes losses.

Over the last several years, the People's Bank of China has led the way among central banks in buying U.S. mortgage-backed securities, accumulating an estimated $100 billion worth of them, according to people with knowledge of the central bank's trading. The People's Bank of China has long chosen some of the most creditworthy tranches of these securities.

But with the malaise in the U.S. housing market, even the value of some previously creditworthy mortgage investments is starting to erode. The Chinese central bank abruptly halted purchases of U.S. mortgage-backed securities in May, although it does not appear to be liquidating existing holdings, said one person who follows the bank's trading practices closely.

This person insisted on anonymity because of the central bank's policy of banning transactions with any individual or institution that discloses information about it.

China's loss of appetite for U.S. mortgage-backed securities and its indigestion from the Blackstone deal do not mean that China has lost interest in overseas investments. The China Development Bank, a state-owned institution, agreed last week to invest €2.2 billion in Barclays, the British bank, and to invest another €7.6 billion if Barclays won the ongoing bidding for ABN AMRO.

With China running a trade surplus that hit $26.91 billion in June, the central bank is issuing torrents of yuan and frantically buying dollars to prevent the yuan from rising quickly against the dollar in currency markets. The government's large purchases of dollars, and of other currencies to a lesser extent, has created a big problem of how to invest the money.

The government's latest solution is to begin creating a so-called sovereign wealth fund: a government-owned investment company that issues yuan-denominated bonds in China and uses the proceeds to buy dollars for overseas acquisitions.

Although the company has not even been legally chartered yet, the Blackstone acquisition was made on its behalf by another government entity.

Jesse Wang, the chairman of the other entity, who is expected to become the leader of the investment company, declined on Thursday to discuss the Blackstone investment. Blackstone also declined to comment on the recent criticisms in China.

As credit markets began to deteriorate this spring and pressure grew for higher taxes on private equity funds, Blackstone's leaders shrewdly pulled forward the date of the company's initial public offering and priced it at $31 a share, the top of the planned range. The stock rose on June 22, the first day of trading, but has slumped steeply since then.

Blackstone shares recovered slightly on Thursday, rising 74 cents to $25.05 in afternoon trading in New York.

Foreign investments are particularly tricky for the Chinese government because of virulent nationalism, born of centuries of foreign invasions and occupations like the British capture of Hong Kong in 1841 and the Japanese capture of Manchuria in 1931.

The same online writer who warned of wolves in human skin also cautioned that, "These fierce wolves are similar to the foreign thieves who pillaged our forefathers, only they are all the more cunning and manipulative, but their goal of pillaging China does not change with the centuries."

In another sign of the growing role of sovereign wealth funds, Morgan Stanley announced on Thursday that it had hired Dina Kos to the new position of managing director for central banks and sovereign wealth funds in the company's investment management division.

Kos, who will be based in Hong Kong, had been the executive vice president for markets at the Federal Reserve Bank of New York.

Chinese officials have called for other countries to accept government investments in their companies without discrimination. But China's own record on this issue is murky.

In a little-noticed move on July 18, the government of Hong Kong, a semi-autonomous Chinese territory, introduced a new banking policy. Any bank that is at least 20 percent owned or controlled by a foreign government-controlled entity was banned from participating in the issuance of legal tender. HSBC, the Bank of China and Standard Chartered currently issue Hong Kong's currency under tight government regulation.

The new Hong Kong rule came after Temasek, one of Singapore's sovereign wealth funds, bought 12 percent of Standard Chartered last year, and as Temasek and the China Development Bank were negotiating to take stakes in Barclays.

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Wednesday, August 01, 2007

Another great piece from the Washington Post.

By Edward Cody
Washington Post Foreign Service
Wednesday, August 1, 2007; Page A10

TIAN SHIFU, China -- By 9 p.m., the Tianying karaoke bar was jumping. Two co-ed

parties were underway, with celebrants drinking and singing. In the bathhouse

section, men were soaking in hot tubs and enjoying the company of prostitutes, while

other customers tried their luck in a pocket-size gambling den.

That is when the blast went off.

More than 400 pounds of nitrate-based explosives, used in nearby coal mines, ripped

through the Tianying compound, reducing it to debris. Many of those partying inside

were killed, along with several passersby. The concussion knocked in walls and

shredded windows in nearby buildings, sending out sprays of glass shards that

injured people gathered with their families to watch television.

What happened that sultry evening of July 4 seemed to be news by anybody's

definition. It was the worst disaster in ages to hit Tian Shifu, a raw town of

40,000 residents in the wooded hills of Liaoning province 350 miles northeast of

Beijing. But local Communist Party censors decided otherwise. They blacked out news

of the explosion, barring papers and television stations here in Benxi county and

the nearby provincial capital of Shenyang from investigating what had happened and

telling the public about it.

The party's vast propaganda and censorship bureaucracy, although best known for

curbing national media, has long exercised its most drastic controls in the

newsrooms of China's provincial papers and television stations, such as those that

serve the people of Tian Shifu. Unfavorable news -- information that could put local

leaders in a bad light in Beijing -- is routinely suppressed by multiple layers of

party propaganda officials in towns, counties, cities and provinces.

As a result, Chinese who live in towns or in the countryside -- the majority of

China's 1.3 billion inhabitants -- have grown used to living largely in ignorance of

what goes on around them, settling for half-truths and daring not to ask for more.

This tight control of information has long been an effective tool for the Communist

Party to maintain its monopoly on power. It has become even more important in the

last two decades as corruption has spread through the party hierarchy, with many

city, county and provincial officials eager to hide their association with local


"We ordinary people don't know what happened," said a woman who works at Tian

Shifu's outdoor food market just behind the destroyed Tianying entertainment

complex. "They haven't told us."

In Beijing, officials in the central government of President Hu Jintao have

suggested repeatedly that a more open attitude is necessary in the age of cellphones

and the Internet. Wang Guoqing, vice minister of the government's national

Information Office, told China Central Television last month that local attempts to

block coverage of negative news are "naive" given the new technology.

Whether Wang was sincere or not in his call for more openness, the message has not

gotten through in China's provincial propaganda offices. At those levels, senior

propaganda officials often are on close terms with local newspaper and television

editors; they attend the same party meetings and follow similar career paths.

Coverage of Tian Shifu's explosion was a case in point.

"The Liaoning Propaganda Department director knows how to control the media," a

local reporter said. "He is a former newspaper editor."

'Standard Practice'

One reporter in Shenyang, the provincial capital 50 miles north of here, said he got

a call from a friend right after the blast and quickly passed on the news to his

editor, hoping to be sent to the scene. But the editor, with reflexes honed by years

of censorship, told the reporter to wait and see what the government wanted to do.

As a result, no news of the explosion appeared in his newspaper -- or any other --

the morning of July 5.

Party censorship officials in Benxi county and Liaoning province, meanwhile, went

into action. After maintaining silence through the night, they authorized a bulletin

on the province's official Dongbei News Network Web site at 6:20 a.m. saying an

explosion had destroyed the karaoke bar, killing five people. Two hours later, the

same short item moved on the official New China News Agency, which meant the rest of

the country also learned of the disaster.

China's Local Censors Muffle an Explosion

At about the same time, the provincial Propaganda Bureau faxed orders to Liaoning

newspapers and television stations saying they could print and broadcast only what

the official agency reported. According to a local journalist who saw the fax, it

said no reporters could investigate on their own and newspapers must de-emphasize

the story by playing it inside without any photos.

At the same time, New China News Agency reporters were ordered to back off the story

and relay only what investigating officials issued through the Propaganda

Department, according to an Internet account quoting disgruntled reporters. Any

other discoveries were to be reported internally, in dispatches that go only to

authorized officials, the account said.

A group of reporters who showed up in Tian Shifu anyway the morning after the blast

were escorted by police to another karaoke bar and told they could not continue

working, according to a local professional. Asked why no one tried to defy the ban,

a reporter answered: "Who would dare?"

In the early afternoon of that same day, Dongbei and the New China News Agency moved

new items reporting that the death toll had risen to 25 and that police were

investigating the cause of the blast. That was the main news dispatch circulated

around China, broadcast on local television and radio stations and printed in five

of the seven main regional newspapers. Two of the newspapers printed nothing at all,

local journalists said, one in protest and the other because editors were eager to

display zeal in implementing party directives.

"It is precisely because it happened in our back yard that we could not report it,"

said a frustrated reporter in Shenyang. "It was impossible for a newspaper or

television station to investigate this news. Everybody knew clearly they couldn't

report on it."

The tight atmosphere was established several years ago, he said, when now Commerce

Minister Bo Xilai was governor of Liaoning province and decreed there would be no

negative news in Shenyang and Dalian, the province's two main cities.

Li Xianpeng, who heads the news division of the Liaoning provincial Propaganda

Department, said "standard practice" in such cases is that government investigators

should be the only source of information. It was in that light, he said, that local

publications and stations were told to stick with the New China News Agency reports

relaying what officials said.

"For some social issues, reporters can do their own investigations," Li said. "But

in cases of serious incidents, government departments should do the work. If

reporters can do investigations on everything, then what is the use of government


Four days after the blast, the New China News Agency issued a short item quoting

investigators saying the final death toll was 25 and the blast occurred because of

"spontaneous combustion" of explosives in the building. It offered no further


Missing Details

A 46-year-old man who identified himself only as Xie said he and some companions

enjoying the bathhouse that night smelled heavy smoke just before the explosion.

They all ran for the exit, he said, because the smoke was filling the room.

"I was the last one," Xie added from his sickbed in the First People's Hospital of

Benxi, the county seat. "As I got to the door, it went off," leaving him with

multiple injuries to his head and legs.

Xie said he had no idea what set off the blast. But other Tian Shifu residents said

they were told that a man who lost heavily in the gaming room had returned to get

revenge. Still others said the owner's longtime mistress had taken a new lover and

might have plotted with him to burn the place down.

The karaoke owner, known as "the kid" and variously identified as Qu Hua and Qu

Yijie, was killed in the blast. His former mistress was taken in for questioning by

police, the residents noted.

Qu, they said, was known as a wealthy man who had owned wildcat coal mines in the

surrounding hills and dealt in wholesale explosives for small coal mine owners, many

of them running illegal operations. His karaoke bar was a center for prostitution

and gambling as well as singing, they said, and the bodies of 18 unidentified women

were taken from the debris in addition to the 25 reported by authorities. Also among

the victims, they added, were two local policemen.

These accounts, from neighbors and other Tian Shifu residents, were impossible to

verify. But many playing cards were seen lying about the debris after the site had

been bulldozed flat, and employees of the nearby Chuang Ye Department Store said

eight of its saleswomen were among the victims.

Journalists for several big-city newspapers and magazines, out of the local censor's

grasp, reported some of these details. The Beijing News identified Qu, for instance,

and the Beijing-based Legal Daily pinpointed stored explosives as the cause of the

blast two days before the official report. One aggressive Internet news site,

http://www.163.com, quoted police as saying they could not exclude the possibility

that the explosives were detonated intentionally.

But local publications followed the orders to keep silent. In addition, Tian Shifu

residents said police had warned them not to talk about the explosion even among

themselves. As a result, all were promised anonymity in conversations with a foreign


At stake, they said, was a compensation payment of up to $26,000 that the government

was offering to victims' families. But in any case, they added, it would be

dangerous getting on the wrong side of the police in this small country town.

"Every word could lead to trouble," one resident said when asked to explain what he

knew about the blast. "We are not even supposed to gossip about it with our


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