On Saturday night, Shanghaiist was strolling along Changle Road (a long street), when we noticed a number of policemen in vehicles moving in both directions with their lights ablaze. Not that there is anything abnormal about that, but a motorcycled policeman did seem to take special interest in us, stopping for a moment to turn his head for a clear look. Perhaps it was because we had a large rucksack in tow or because he thought us strapping he-men. Whatever the reason, it reminded us that currently, somewhere lodged in a historic Shanghai hotel, 100 investigators from the Central Discipline Inspection Commission (CDIC) are stationed for the ongoing graft investigation that has claimed Shanghai Municipality Mayor, Chen Liangyu, among other elite Shanghai politicos. The last time a sitting Politburo member was purged China was in 1995 with the removal Chen Xitong, the Beijing party chief and a significant rival of Jiang Zemin.
Chen is currently being held under “double regulations,” which is a form of house arrest for members of the Communist Party suspected of wrongdoing. Others arrested or under investigation include the following: Zhu Junyi, head of the Shanghai Municipal Labour and Social Security Bureau was fired on August 11 and has since been arrested on charges of taking bribes and misappropriating pension funds under his direct supervision; Qin Yu, chief of Shanghai’s Baoshan District and Chen’s former personal secretary; Wu Minglie; the chairman of the New Huangpu Real Estate Co.; 32 year-old Chairman of Fuxi Investment Holding Company, Zhang Rongkun, one of the city’s most powerful businessmen, the former head of Shanghai Electric, and No. 16 on Forbes’ 2006 list of China’s richest; Wang Chengming, the chairman of the Hong Kong listed Shanghai Electric.
This scandal follows the arrest of Beijing Vice Mayor Liu Zhihua in June, when on August 11, Zhu Junyi was fired his post and convicted of accepting bribes and illegally lending approximately RMB3.2 billion (US$405 million) from the Shanghai Social Security Bureau’s RMB10 billion fund to a private toll-road company, Fuxi Investment Holdings, run by Zhang Rongkun. Starting in 2002, Fuxi paid a multibillion yuan figure for the rights to operate several toll highways in east China, a 30 year lease of the Shanghai-Hangzhou Railway and an 11% stake in Shanghai Electric at an inflated price which was much to the benefit of Wang Chengming. The scandal was exposed at Fuxi where employees sounded the alarm after seeing credit default on a large scale earlier this year and informed on their superiors.
The New York Times writes:
Chen, 60, inherited the political base of Jiang, who rose to prominence as Shanghai party boss in the 1980s and subsequently promoted many of his cohorts to top national party and government posts. He was once seen as having the potential to join the Politburo Standing Committee and compete for China’s top political titles.
This is not the first time that Chen has been implicated in scandal. In 2003, both Chen and Qin were closely tied to disgraced Shanghai property tycoon Zhou Zhengyi, who received multibillion dollar loans and preferential access to valuable downtown land. While Chen, his family and his cronies were all closely tied to Zhou, they were not the subject of an investigation, but Zhou did receive a short prison sentence. Clearly, even in his conviction and sentencing, Zhou received preferential treatment as the Asia Times writes:
Zhou, who was suspected of a huge loan swindle, was finally brought to justice in 2003, but he was only found guilty of “manipulating stock prices and misreporting registered capital,” for which he received a three-year jail sentence. By contrast, the former president of the Bank of China (Hong Kong), Liu Jinbao, implicated in the same case, was eventually given a suspended death sentence by a court in Changchun, the provincial capital of Jilin province in northeastern China.
Of course, there are deeper political dimensions to all of this, as the New York Times writes:
Most of the people implicated in the scandals are viewed as old loyalists of Jiang or members of the Politburo not considered among the core supporters of Hu, leading to suspicions that Hu has used the fight against corruption as a tool to eliminate opponents.
Further on they say:
Chen’s political machine has long been considered one of the strongest and most corrupt in a country where the powerful find ways to claim a big share of the country’s prosperity, despite almost constant anti-corruption campaigns within the ruling party.
Essentially, this is a great victory for President Hu Jintao and his supporters for whom this scandal serves multiple purposes. Most directly, it is a major blow against corruption, and sends and unmistakable message to corrupt officials. Furthermore, in a very significant way, Hu has asserted his authority by removing a cadre which, under Jiang’s protection, did not always follow marching orders from Beijing. Thirdly, he has cleared opposition for the nomination of his own heir-apparent when the party convenes its quinquennial congress at the end of 2007.
What or who else will fall from this scandal and from the more broad anti-corruption campaign remains to be seen. The Sydney Morning Herald writes:
Following the scandal and public anger, the National Audit Office has announced it will audit local pension funds in every region except Tibet and Shanghai. China’s fledgling social security network has an estimated US$226 billion ([AUS]$301 billion) in funds but this is calculated to be well below what is needed to provide for its rapidly ageing population, and the amount paid in each year is falling short by some US$12 billion.
Additionally, removal of Chen et al. has created an element of uncertainty in Shanghai which will only be enhanced by a possible struggle to fill any power vaccuum. Reportedly, Chen’s successor has been chosen but not yet announced to the public.
The China Daily has a timeline of the major officials sacked for corruption in recent months:
June 11: Beijing vice-mayor Liu Zhihua sacked by the Standing Committee of Beijing Municipal People’s Congress for corruption and dissolute behaviour.
Late June: People’s Liberation Army navy deputy commander Wang Shouye dismissed by the Central Military Commission on charges of economic crimes. He was also expelled from the Standing Committee of the National People’s Congress (NPC), China’s top legislature, on June 29.
August 11: Zhu Junyi, director of the Shanghai Municipal Bureau of Labour and Social Security, sacked for taking bribes and siphoning money from social security funds.
August 24: Qin Yu, director of Shanghai Baoshan District, sacked and put under investigation for grave breach of discipline.
August 25: He Minxu, a vice-governor of eastern Anhui Province, dismissed from his duties and awaiting trial for taking bribes and engaging in illegal land deals.
August 27: Li Baojin, chief prosecutor of Tianjin, dismissed on charges of severe breach of discipline