Corruption Case Breaks ‘Shanghai Taboo’
Fall of City Leader Reflects Chinese President’s Drive to Cement His Power, Vision
SHANGHAI — Long a proud showcase for economic development, Shanghai has recently become the stage for a high-stakes drama of corruption, vice and political intrigue with far-reaching consequences for the Chinese Communist Party.
The scandal, which has brought down one of China’s senior leaders, has its origins in large-scale graft in the local party apparatus. But more broadly, it reflects a political decision by President Hu Jintao to flex his leadership muscles against entrenched party officials known as the Shanghai faction, loosely grouped around former president Jiang Zemin and his proteges from this coastal boomtown.
The arrests in Shanghai were part of Hu’s cautious but relentless drive to cement his power as party leader and ensure faithfulness to his vision up and down the hierarchy. That effort, foreign and Chinese specialists said, will reach a high point at the 17th Party Congress in the fall, when Hu and his lieutenants are expected to stack the party’s ruling bodies, the Politburo and its Standing Committee, with Hu loyalists.
“The political aspect here is much more important than the law enforcement aspect,” one Chinese corruption expert said, speaking on condition of anonymity because of the sensitivity of inner-party politics. “The interesting point here is that before, nobody could touch Shanghai, and now you can. Hu wanted to break the Shanghai taboo.”
The latest turn in the case came last month when the official New China News Agency announced that Xi Jinping, 53, will be the new party secretary for Shanghai, moving from a similar job in neighboring Zhejiang province. He replaced Chen Liangyu, 60, who was fired and placed under investigation in September for allegedly using a government pension fund to make more than $400 million in loans to a corrupt businessman.
Chen’s fall was an important marker in Chinese politics. Not only was he secretary of the Shanghai Communist Party — the most powerful man in China’s biggest and richest city — but he was also a member of the 24-man national Politburo that sets the course for China’s 1.3 billion people.
Only two other Politburo members have been dismissed and prosecuted for corruption since the party came to power in 1949. Chen Xitong, mayor of Beijing, was jailed in 1995, and Cheng Kejie, deputy chairman of the National People’s Congress Standing Committee, was executed in 2000.
In addition, Chen was known as a political heir of former president Jiang, whose base was in Shanghai, and as an outspoken champion of Shanghai’s role in national affairs. In particular, he was reported to have questioned efforts by Hu and Premier Wen Jiabao to balance economic growth by favoring poorer central regions over the booming coastal cities epitomized by Shangahi.
A document purported to be a classified report by the New China News Agency quoted Chen as belittling Hu and Wen and accusing them of taking a simple-minded approach. “Development can never be absolutely balanced,” the document quoted Chen as saying. “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.”
The challenge to Hu’s authority and his trademark policy played a big part in the decision to investigate corruption in Shanghai, according to Cheng Li, a China scholar at the Brookings Institution who has researched the case.
Chen’s Shanghai operations had long been regarded as corrupt, according to several specialists. But Hu, who became party leader in 2002 and president the following year, feared at first that it would be imprudent to crack down on such a senior official with clear ties to Jiang, they said.
When the decision to oust Chen was finally made in 2005, however, Jiang and his followers stood aside, the specialists said. This was in line with other signs that Hu and Jiang loyalists have increasingly cooperated as Hu solidifies his position. Hu’s working relationship with Vice President Zeng Qinghong, another Jiang protege and Shanghai veteran, has been described as unexpectedly smooth.
Jockeying between the two groups is more about placing favorites in key positions than ideological clashes, noted a diplomat with long Asian experience. The camps agree that China must push forward with market reforms, he said, but perhaps differ slightly on how much emphasis to put on protecting those left behind by the changes.
Xi Jinping, Chen’s replacement, came from outside Shanghai but is regarded as a champion of Shanghai-style market reform. Cheng Li, the Brookings scholar, said Xi is also regarded as a protege of Jiang and, especially, Zeng, meaning that Hu took care to preserve relations with the Shanghai veterans.
Jiang himself took an extended trip to distant Shandong province around the time investigators were digging through Chen’s records in Shanghai, Shandong officials said, removing himself from any effort to defend Chen.
Investigators from the party’s Central Commission for Discipline Inspection, dispatched from other areas of China, worked for months in secret on Chen’s case. They amassed information on a series of loans from the pension fund that, according to reports from the investigation, went mainly to finance road building and other investments by a politically connected businessman, Zhang Rongkun, who is under investigation.
As they followed leads up the hierarchy, the investigators outlined Chen’s role in the loans and also began to target Huang Ju, a Shanghai veteran who under Jiang’s patronage had risen to become vice premier and a member of the Politburo’s Standing Committee in charge of economic reform, the corruption specialist said. But senior officials in Beijing made it clear that the investigation was to stop at Chen’s level, he added, and the probe of Huang’s role was dropped.
Huang, who is reported to have cancer, has largely abandoned his official activities. Several analysts have predicted he will be removed from the Politburo and its Standing Committee for health reasons dur- ing the party congress in the fall.
Soon after Chen’s disgrace was made public in September, a halfdozen quickie books were published purporting to provide details of his corrupt activities and indulgent lifestyle. Although the books’ authenticity was never confirmed, sales were brisk, and tales of multiple mistresses and high-rent love nests titillated Shanghai for months.
Like Chinese in other cities, many Shanghai residents were more than ready to believe that the municipal government was corrupt. But they also understood the national political implications of Hu’s move against a well-known Jiang protege who was refusing to get with the program.
“Chen was fired because he would not do what Hu told him to,” commented a jolly man shining shoes at the entrance to a little downtown park.
The government announced last month that nine officials had been expelled from the party so far in connection with Chen’s case, including his former secretary. In past cases, such announcements have signaled that party investigators were ready to turn their files over to the courts for criminal prosecution.
But nothing has been announced about Chen’s own fate. Although he remains out of sight, presumably under house arrest here, he was still listed as “Comrade Chen” on a roster of Shanghai delegates to the recently concluded legislative session in Beijing.
In allowing the graft probe, Chinese President Hu Jintao flexed his leadership muscles against entrenched party officials known as the Shanghai faction.
Chen Liangyu, fired as secretary of the Shanghai Communist Party, was a political heir of former president Jiang Zemin, whose base was in Shanghai.