Corruption Case Breaks 'Shanghai Taboo'

By Edward Cody
Washington Post Foreign Service
Sunday, April 1, 2007

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.

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