Elite Chinese Politics and Political Economy

Reshuffling of Provincial PSs

Well, it is now clear that Hu is trying to maneuver as many of his people into position before he hands (some) power over in 2012. We see CYL veteran Hu Chunhua (also Hu Jintao's former secretary) and Lu Zhangong taking over Inner Mongolia and Henan respectively. Another official possibly related to Hu's faction, Wang Min, was rotated from PS of Jilin to Liaoning, a lateral promotion as Liaoning is a much more important province. Wang overlapped with Li Yuanchao in Jiangsu, although Li didn't really have a say over his promotion to Suzhou.

The other promotions, however, show that Hu did not have all the say. Sun Chunlan's promotion from a relatively powerless position in the union to party secretary of Fujian, for example, shows that Bo Xilai likely exerted some influence on high level promotions. Sun was Bo's successor in Dalian. Likewise, Huang Qifan's promotion to the mayoral post in Chongqing puts Chongqing further out of Hu Jintao's control, as Huang comes from the Jiang Zemin-Huang Ju faction in Shanghai. Again, to more credibly demonstrate his power, Hu will need to launch a comprehensive anti-corruption crackdown somewhere....



http://www.straitstimes.com/PrimeNews/Story/STIStory_460954.html
Home > Prime News > Story
Dec 1, 2009
'Little Hu' in front as future leader
Hu Jintao protege could well climb to top job in 2022
By Peh Shing Huei, China Bureau Chief

BEIJING: Chinese President Hu Jintao's protege, Mr Hu Chunhua, has
emerged as the front-runner in the race to be the country's future top
leader after a reshuffle of provincial chiefs yesterday.

The changes also included a new woman provincial party secretary, the
first in more than two decades. Ms Sun Chunlan, 59, was catapulted
from her position as a top unionist to Fujian party boss.

But it was the appointment of 46-year-old Mr Hu as the new chief of
the Inner Mongolia region which carried greater political
significance, noted analysts of Chinese elite politics.

'He is now on the fast-track to being China's sixth-generation
leader,' said Dr Bo Zhiyue, of the East Asian Institute in Singapore.
The two Hus are not related.

Going by the current trend of national leaders serving two terms of
five years each, Mr Hu and the 'sixth generation' politicians are
slated to take over as national leaders in 2022.

President Hu, 66, is widely believed to be stepping down in 2012 and
is likely to be succeeded by Vice-President Xi Jinping, 56, leader of
the 'fifth generation'.

The younger Hu, or 'Little Hu', is now in early pole position to
ascend to the top position of the Chinese Communist Party (CCP)
thereafter.

His Inner Mongolia appointment means he is the fastest in his cohort -
those in their 40s - to be made a provincial chief.

Only Agriculture Minister Sun Zhengcai, also 46, has matched his
speedy rise, after being promoted to the role of party boss of
north-eastern Jilin province yesterday.

But Mr Hu, who was the governor of northern Hebei province, is widely
regarded as the one with a stronger political pedigree, having been
the leader of the key Communist Youth League, the power base of
President Hu.

The Chinese studies graduate from Peking University has also spent 23
years working in Tibet, a tough posting which earned him respect from
the Chinese Communist Party rank-and-file. By comparison, Mr Sun, an
agriculture PhD-holder, spent his entire political career in Beijing.

Both Mr Hu and Mr Sun were among five young leaders profiled by a
state-run magazine in April this year - a sign that the quintet had
been earmarked for higher office. But only two were promoted to
provincial chiefs yesterday, indicating that they have surged ahead of
the pack.

The others appointed were above 50 years old, such as Ms Sun, new
Henan boss Lu Zhangong and new Liaoning chief Wang Min.

Analysts believe there is a good chance that the boyish-looking Mr Hu
will even make the leap to the elite 25-man Politburo in 2012, when
the CCP holds its 18th Party Congress.

It would resemble the arrangement which Mr Hu Jintao went through,
parachuting into the decision-making Politburo Standing Committee in
1992, a good decade before he took over the reins from Mr Jiang Zemin.

But analyst Wang Zhengxu from the University of Nottingham's China
Policy Institute warned that 'Little Hu' has an Achilles heel which
his political rivals may exploit.

'His biggest weakness is that he has been working in poor places,
including now Inner Mongolia. He lacks the experience of operating in
the rich coastal provinces, which are important as China becomes a
greater economic power,' he observed.

shpeh@sph.com.sg

Another Suzhou man promoted

BEIJING: The Communist Party bosses from Suzhou city continue to power
ahead. Mr Wang Min (above), who served as Suzhou party secretary from
2002 to 2004, left his position as Jilin provincial chief to head
neighbouring Liaoning.

While the appointment appeared on paper to be a lateral move, Liaoning
is widely regarded as a more important and prestigious province.

Mr Wang, 59, is the fourth consecutive Suzhou chief to climb the
political ladder. Predecessors Liang Baohua and Chen Deming are now
Jiangsu provincial chief and Commerce Minister respectively.

A key factor in their success is Suzhou's prominence in the national
media, thanks to the 15-year-old China-Singapore Suzhou Industrial
Park. The massive project has earned Suzhou party secretaries a
reputation as economic reformists who are pro-business and have a
global outlook.
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SCMP

Reshuffle sees new mayor for Chongqing

Verna Yu
Dec 01, 2009

The central government yesterday nominated a new mayor for the
municipality of Chongqing and also promoted a close ally of President
Hu Jintao to a regional party chief position, in a new round of
leadership reshuffling at the provincial government level.

The latest changes signal that preparations for the next party
congress in 2012 are quietly under way.

Chongqing Deputy Mayor Huang Qifan has been nominated to become the
mayor of the southwestern municipality, which has recently launched a
massive crackdown on organised crime, Xinhua reported.

Huang, 57, previously deputy secretary general of the Shanghai
government, became Chongqing's deputy mayor in 2001 and has since been
in charge of the municipality's finance and industry sectors.

Reports did not mention what the next appointment of his predecessor
Wang Hongju would be, although he turned 64 last month, one year from
the official retirement age.

Meanwhile, one of Hu's closest allies, Hebei province Governor Hu
Chunhua , has been promoted to party chief of the Inner Mongolia
region .

Born in 1963, Hu Chunhua became the youngest provincial governor when
he was appointed deputy governor and acting governor of Hebei last
year at the age of 45.

Hu Chunhua is one of the youngest senior party officials and is tipped
to be a leading candidate for the next Politburo in 2012.

Potential Politburo members often need the experience of two or three
top provincial posts, according to analysts.

Hu was previously first secretary of the secretariat of the Chinese
Youth League - the power base of President Hu - and worked in Tibet
for more than 20 years.

Meanwhile, the government also announced that Jilin province party
chief Dr Wang Min would take over the top post in neighbouring
Liaoning . He will be replaced by 46-year-old Agriculture Minister Dr
Sun Zhengcai . Wang, 59, has a PhD in machinery manufacturing, and Sun
has a PhD in agriculture. Sun, born in 1963, is also tipped to be a
leading candidate for the next Politburo.

The government said Sun Chunlan , the 59-year-old vice-chairwoman of
the All-China Federation of Trade Unions, would replace Fujian party
chief Lu Zhangong . Lu, 57, will become party secretary in Henan
province , replacing Xu Guangchun , who turned 65 this month.

Leveraging Big-Time by Local Development Companies

I would just like to show readers the type of leveraging that is going on in China. Hainan Highway, set up by the Hainan government ten years ago to finance highway construction, is an early example of the thousands of local development companies that now pervade China. They usually get a bit of capital from the government and use that to borrow money from banks or issue bonds to investors. Fortunately, some of these entities are listed so we can see how they work. Note, however, that because they are listed, they already represent "the best of" local development companies. finance.Sina.com has a very powerful feature that breaks down various parts of listed companies' annual and quarterly reports. See here.

So here, Hainan Highway has total asset of around 2.7 billion RMB. The largest category is various kinds of accounts receivables. Well, that sounds good, except the annual report also states that the largest debtor to Hainan Highway is the founder of the company, Hainan Department of Transportation!! Moreover, its debt to Hainan Highway ballooned from around 150 million in 2008 to nearly 450 million RMB! Okay, so this is what is happening. Local governments use some land or revenue cash flows to start these entities, which then go and borrow money from banks and investors. Then, local governments in turn borrow from these entities, especially those that generate some cash flows. My question is: since these loans to local government is identified as asset, can these companies borrow even more from banks on the basis of this "account receivable?" I think they can!

Again, this is happening to thousands of such entities across China! (by the way, kudos to reader who figures out who Chen Xuehui is, as he got a million RMB loan from the company for no apparent reason).

Let’s Look at China’s Liabilities Again

Recently, on a China specialist bulletin board, the debate on “the China collapse” hypothesis flared up again. As you can imagine, things got pretty heated between my colleagues. I have learned that predicting the future is a losing game, but we can certainly look at facts and bring in some skepticism. Incidentally, I am working on a project to calculate the extent of borrowing from local government investment entities, which are discussed below. I am about half way through the provinces, but will update interested readers on my findings in the coming months. Below is my contribution to the “collapse” debate.

Chiming in among the skeptics, I think we tend to focus on the asset side of China’s balance sheet, which is quite impressive to be sure. However, the Chinese government is also good at hiding its various liabilities (in the accounting sense) through various entities and strategies. Let’s ignore human costs like reduced life expectancy from the environment, lack of social services and work safety for the moment and only focus on financial liabilities. Among the OECD countries, we see that public debt escalated tremendously due to stimulus programs and financial bailouts. However, it would be mistaken to argue that China accomplished 9% growth without getting into massive debt. In fact, it got into much more de facto public debt as a share of GDP than the US or Europe did. If Cpolers remember a conversation about the rise of deficit this year in China, which put official debt this year at a modest 25% of GDP. However, the reason growth is so high this year is due mainly to investment. In addition to the 4 trln RMB central government package, local governments also rolled out additional trillions in investment projects. In OECD countries, much of these projects will be financed through the official budget, but in China, local governments set up urban development companies to raise this money as “corporate loans” from banks. Thus, around 70-80% of this trillions in investment was financed through bank loans.

More will have to be spent to finance these projects. Local governments learned long ago (possibly in the 50s) that when the central government is feeling generous, start as many projects as possible as oppose to spend money to complete projects. This is because they know that the central government will retrench one day, but the center is still reluctant to cut off funding from on-going projects, which result in total loss. On this basis, Nomura Securities, typically a very bullish outfit, estimates that new lending will again have to be 10 trln RMB for both 2010 and 2011 to fully finance existing construction projects. This means local governments will need to get into trillions more in debt (probably 10 trln in addition to what ever the current amount is).

Does this mean a collapse? certainly not necessarily as the government holds a lot of assets. However, as with any country, we should also pay attention to the liabilities.

The Collapse of Caijing

As many of you know already, Hu Shuli, the editor of the influential Caijing Magazine, has quit her post and will become dean of the media and journalism school at Zhongshan University in Guangzhou. In the mean time, she is planning her new publication. The excellent NYT piece below outlines some of the behind-the-scene dynamics of this development. The main question of course is how much this has to do with political pressure against Caijing's hard-hitting style and how much this is related to Hu Shuli's desire to get a larger piece of the profit.

I am curious about another facet of this case-- why Zhongshan University. To be sure, it is a top university in China, but I wouldn't imagine it to be a top journalism school in China. There is journalism school at Peking U., Renmin University....etc. Why didn't any of those schools offer her positions, and why didn't she take them if offered? The issue certainly isn't money, of which she has plenty. This suggests to me that the Beijing schools were under some pressure to not hire her in an important position. Only Zhongshan University, a key institution in Guangdong Province governed by reformist leader Wang Yang, dared to hire her in an important position. Is this important? Maybe, and maybe it is useful to once again use terms like "reformist" and "conservatives" to describe the policy preferences of various elite actors.

New York Times

November 10, 2009

Editor Departs China Magazine After High-Profile Tussle

By JONATHAN ANSFIELD

BEIJING — The pioneering editor of the top Chinese business magazine has left her post with plans to start anew, after a tussle for control involving much the same mix of political and financial intrigue that she made her mark uncovering.

Hu Shuli, 56, resigned Monday from Caijing, the magazine she built into a thriving print and Web outlet that specialized in investigating government corruption and corporate fraud, said a Caijing spokeswoman, Zhang Lihui. Senior editors and most of Caijing’s journalists either had already resigned or were preparing to as well, magazine employees said.

For months, Ms. Hu, the editor in chief, and the business managers of the magazine had been locked in a stalemate with the owners of Caijing over the breadth of the magazine’s coverage and the budgeting of its operations, said former employees and current staff members who asked not to be identified because they feared losing their jobs.

The owners of the magazine had come under pressure from Communist Party officials to rein in Caijing’s aggressive journalism, people at the magazine have said.

Managers at Caijing told staff members that they had been fighting to maintain the magazine’s editorial integrity.

The managers had been seeking to create a more independent publication by changing the magazine’s shareholding structure, seeking outside investors and pressing the owners to allow more employees to own a stake in the magazine.

In a well-publicized exodus earlier this autumn, nearly 70 business employees resigned. Ms. Hu held on until Monday.

She has now accepted a new post as the dean of the journalism school at Sun Yat-sen University in Guangzhou, a job she had been offered before it became clear that she would leave Caijing.

At the same time, she, along with a large contingent of editors and executives departing Caijing, was working to secure new licenses and open a new venture, said the employees, who had knowledge of the plans but were not authorized to speak publicly about them.

Caijing’s parent company, the State Exchange Executive Council, or S.E.E.C., had already recruited a new team of editors from another progressive publication, The Economic Observer in Beijing, they said.

In 11 years at Caijing, editorials by Ms. Hu pinpointed interest groups and bottlenecks that she said blocked economic overhauls. And exclusives by Caijing hastened the demise of some of the more notorious felons in China.

But the magazine’s own troubles have involved just the sort of topic that Ms. Hu and Caijing relished covering.

The political price of success grew in recent years. Ms. Hu found herself increasingly at odds with S.E.E.C. bosses and their Communist Party guardians, according to employees and other colleagues during interviews in recent months.

After a run-in with a Caijing reporter covering the ethnic riots in the western region of Xinjiang in July, officials leaned harder on Ms. Hu’s superiors to curb her coverage, the employees said.

At one point, the S.E.E.C. was ordered to fire Ms. Hu, they said. The pressures brought the infighting over editorial and financial control of Caijing to a boil.

Ms. Hu did not respond to requests for comment Monday.

Known for enforcing a rigid code of conduct, she has been characteristically guarded during the crisis.

“I am still working on a good result,” she wrote in an e-mail message to The New York Times late last month.

Under her current plan, her new publishing sponsor would be the province-level Zhejiang Daily Press, said the Caijing employees and a Zhejiang Daily editor.

She has been talking with well-known Chinese investors. Her proposed new publication’s title has a familiar ring: “Caixin,” short for “Caijing Newsweek.”

The split reflects the divergence of interests in a media market still governed by party cadres, said Zhan Jiang, a journalism professor at Beijing Foreign Languages University.

“Some people still stick to their ideals,” he said. “But management has become increasingly concerned with profits, and increasingly conservative.”

Moreover, as the central authorities lavish official Chinese media giants with support to grow and compete globally, they also have made moves to tighten their chain of command over muckrakers like Ms. Hu.

Not that Ms. Hu is like any other. She has become an unrivaled celebrity, and counts senior economic officials friends from her reporting days at state-owned newspapers.

At S.E.E.C., she was uniquely insulated. The chairman of the S.E.E.C., Wang Boming, a former New York Stock Exchange economist, is the son of a former deputy foreign minister.

When Mr. Wang and Ms. Hu started Caijing, in 1998, he met her demands to finance the newsroom and not interfere.

But their ambitions clashed as the influence of Caijing grew. Caijing now generates about half of the group’s revenue, but the S.E.E.C. has reinvested a considerably smaller percentage.

Mr. Wang has diversified into less daring titles, most of which have struggled.

Members of Ms. Hu’s team, in turn, went their own way, expanding Caijing online. They also tapped outside partners, like the Hong Kong tycoon Richard Li, with whom Ms. Hu has been developing a financial news service.

Behind the scenes, a conservative official named Quan Zhezhu had taken over Communist Party affairs at the organization that sponsors Caijing’s publishing license, the All-China Federation of Industry and Commerce, in 2007. The Federation ramped up pressure on Mr. Wang to curb coverage by Ms. Hu.

“They say she’s ungrateful, that without them the magazine would have been closed a long time ago,” a friend of Mr. Wang’s said.

An S.E.E.C. executive did not answer requests for comment in recent days.

Ms. Hu was able to elude serious trouble through the spring. After Caijing revealed a corruption investigation into China Central Television earlier this year, government media officials demanded that the story be recalled, the employees said.

But within a couple days, Caijing reposted the piece online and handed out hundreds of undistributed magazines to delegates at the annual legislative sessions.

When the ethnic riots broke out in July, Ms. Hu promptly dispatched three journalists to Urumqi. But not all of them were able to obtain a permit to be there.

One day, at the official press center, a veteran reporter named Yang Binbin was caught carrying a credential borrowed from a former coworker. When an official tried to search his laptop, he resisted, and he and a guard scuffled. The police carted off the reporter for questioning.

“Our pressures and conflicts had accumulated over a long time, but this incident was the fuse,” said a Caijing colleague of Mr. Yang, who himself declined to comment.

By mid-July, journalists said, the party’s powerful Central Commission on Politics and Law discussed the need to “rectify” Caijing. The authorities have reprimanded the magazine for at least eight articles this year, including the China Central Television inquiry, and directed it to “return to positive reporting on finance and economics.”

Under orders from the All-China Federation, the S.E.E.C. demanded the right to prescreen the magazine before it went to print.

Ms. Hu resisted the order. But the magazine was still required to cut at least three investigative features, including one from Urumqi, and the Web site scrapped two new columns and left the “Politics and Law” section without new posts for three days in September, to avoid riling officials.

At a gathering with Mr. Wang in August, according to a friend of his in attendance, Mr. Wang said that officials had pressured him to fire Ms. Hu. Mr. Wang said that he would not go so far as to dismiss the acclaimed newswoman and that, he told friends, the move would cause an international scandal.

But his perceived failure to stand up to editorial pressures exacerbated the financial infighting about ownership shares and budgets, to the point that Ms. Hu and Mr. Wang, as another journalist put it, “couldn’t stand each other.”

In late September, Caijing’s general manager and other executives led a walkout of more than 60 business staff members. As of last month, dozens of those who resigned had already started working at what several said were Caixin’s new offices.

For weeks, many journalists have been planning to follow Ms. Hu to the new venture. But Ms. Hu could have to wait months for new publishing licenses, if the authorities approve them, the journalist and others said.

“She hopes that by having this new academic position will make it easier for her to negotiate” to start the new outlet, said the journalist, who was among those preparing to rejoin Ms. Hu.