Economy, Talking Point

China’s most wanted

Shock as corrupt top Shandong official allegedly made $9 billion

China’s most wanted

The $9 billon dollar man: Huang Sheng

On the most recent ‘Rich List’ drawn up by Forbes magazine in the United States, Huang Sheng’s wealth would (perhaps) have ranked him number 34. Amazingly that would have taken him above Rupert Murdoch, Ralph Lauren and the recently deceased Steve Jobs.

But Huang is no American and few at Forbes are likely to have even heard of him.

This week that might have changed, as he jumped to the top of a less prestigious ranking – that of corrupt Chinese officials.

Huang, the deputy governor of Shandong province, was this week detained for “serious violations of discipline”, apparatchik–speak for being caught with his hand in the till. According to widely-read gossip on Sina Weibo, China’s Twitter-equivalent, Huang had accumulated an ill-gotten $9 billion personal fortune. (At this point Huang is “suspected” of corruption but the exact amount has not been officially confirmed. Xinhua’s website, however did quote from Sina the rumoured $9 billion number.)

It sounds a bit large. Then again, allegedly Huang didn’t do things by halves – another number to cause a stir on Sina Weibo: he is said to have kept 46 mistresses.

As China heads into 2012, struggles over corruption are moving centre stage ahead of the biggest political reshuffle in a decade at the 18th Party Congress next October.

That means that there is going to be much to play for in the months ahead, with rival factions vying for influence. In this drawn-out game of political chess, pawns will be taken or sacrificed. Huang may well be an early example: it’s not clear who he might have been close to politically, but it would be naïve to see his ousting purely as the result of a routine investigation.

Anyone else caught in the corruption net?

On September 29 the deputy governor of Sichuan province, Li Chengyun, was also detained on similar charges, and in June Li Yuan, a senior official at the government’s top advisory body, the Chinese People’s Political Consultative Conference, was arrested. In May former Shenzhen mayor Xu Zongheng, was sentenced to death for corruption stretching back to 2001 (the death penalty was then suspended because of “good cooperation”). And, of course, Liu Zhijun, the Minister of Railways, was detained in February (see WiC95). Up until Huang’s arrest, Liu ranked as the most corrupt official to be caught, with estimates of a personal fortune approaching $2 billion (but only a mere 19 mistresses, it seems).

“This year there have been so many cases, and from now until October next year, there will be many more,” says Liao Ran, programme officer for China and South Asia at Transparency International, a non-governmental anti-corruption organisation based in Berlin.

Why are corruption cases the clue to a deeper sense of political transition?

“The very top uses corruption to control people, creating a basic form of stability in ordinary times,” says Liao. “And yet, it is dangerous when the power balance shifts,” he warns.

In other words, this apparent florescence of graft isn’t actually about corruption, although the crime is obviously real enough.

Instead, it’s about power: who stands with whom, who is protected, and who is left exposed to a knock-on-the-door from the Central Discipline Inspection Commission.

This will affect business and businessmen too. “Next year you can’t use economics to explain the economy. You’ll have to use ‘stability,’” says He Fan, deputy director of the Institute of World Economics and Politics at the Chinese Academy of Social Science.

The message? Keep your head down, follow the flow of new criminal cases and try to work out how power is shifting.

Bear in mind too that the government functionary who does you the honour of turning up at your banquet may not be around next year. Perhaps he’ll be promoted to a more senior role in Beijing. Or he might be in jail, or escaped to self-imposed exile in Canada.

What is going to change next year?

Current leaders President Hu Jintao, Premier Wen Jiabao and Wu Bangguo, Chairman of the National People’s Congress, are all expected to retire. Hu’s replacement has long been tipped as Xi Jinping, the current vice-president. Wen’s successor will probably be vice-premier Li Keqiang. Who takes over from Wu is less clear.

But there’s more at stake than these three positions. According to Cheng Li, an analyst at the Brookings Institution, as many as seven of the nine members of the Politburo Standing Committee, the highest decision-making body in the country, are expected to retire. “Within the full 25-member Politburo, at least 14 leaders will vacate their seats to make way for younger candidates. Consequently, the principal figures responsible for the country’s political and ideological affairs, economic and financial administration, foreign policy, and military operations will consist of newcomers after 2012,” Cheng says.

In a five-part series China’s Midterm Jockeying: Gearing up for 2012 Cheng also notes: “The main contenders for the top Chinese leadership in 2012 have already been engaged in personal political campaigns (in the Chinese style, of course). … During the New Year celebrations of 2010, for example, Xi [Jinping] used the short message service (SMS) to send a text message of his ‘personal’ greetings to approximately one million officials in the Party grassroots branches across the entire country – an unprecedented way for a top Party leader to communicate with local officials. Meanwhile, Li [Keqiang] has drawn attention for his strong interest in such areas as climate change, energy efficiency, healthcare and affordable housing. None of these issues was a priority for Chinese leaders 10 years ago.”

So how does corruption touch politics?

The battleground is the Central Discipline Inspection Commission. “Each top leader has his people there,” says Liao. These supporters are deployed to open cases on their bosses’ rivals.

Take the strange fact that many of the recent corruption cases involve deputies, such as vice governors. Huang Sheng, Li Chengyun and Li Yuan are all deputies. The deputy chief of the State Food and Drug Administration, Zhang Jingli, was also detained recently for about Rmb40 million of graft.

There’s a phrase for that in Chinese: “Beat the dog and watch its owner.”

“I won’t insult you but I will kick your dog,” is how Liao translates the phrase, noting that attacking a deputy is seen as a means of getting at his boss. Once a deputy has been detained, questions start being asked. Does the senior man lack the power or the will to protect his subordinate? Is he the real target?

So how bad is the corruption?

This is the million – or perhaps trillion – renminbi question.

As a secret vice, it’s hard to say how severe the problem has become. But Huang Sheng’s $9 billion haul – if true – is an eye-popper. And reports of graft involving billions of renminbi are not especially unusual. Last month, Xinhua reported that two local mafia chiefs in the town of Benxi in Liaoning province had been arrested for “crazily accumulating by unfair means” at least Rmb2 billion of cash (the relevance here is that the mafia often works hand-in-hand with local officialdom).

A July report by anti-corruption researchers at the Chinese Academy of Social Sciences (CASS) also suggested that 4,000 Party or state officials have fled overseas in the last 30 years, taking an average Rmb100 million with them. The total amount of money siphoned out of China is much greater, the report warned, citing the Central Discipline Inspection Commission. CASS also noted that about 70% of the Chinese going into exile are managers at state-owned enterprises.

Are corruption cases the only clues to shifting political sand?

No. Word of mouth is another, as well as the tone of the coverage of the main political contenders in the state newspapers.

Political campaigns can be revealing too, such as the push announced in mid-October by the 6th Party Plenum to make China a “strong cultural nation”, which left many onlookers wondering why it should figure so prominently at a major Party meeting.

The answer, says He Fan, is that the gathering wasn’t really about culture at all.

“Take the cultural policy decision,” he says. “It may seem ridiculous from the outside, but these things serve a purpose that foreigners don’t see. The orders get transmitted down to the very bottom of the Party, and then the leaders can see who is loyal and who is not.”

“Of course showing loyalty by enthusiastically supporting something does not necessarily mean true loyalty, but it does mean a person stands up publicly and states his support, and that means everyone knows where he stands. This is a 5,000 year-old system, and it’s all about identifying loyalty.”

Seasoned China-watchers also scrutinise the travel plans of existing leaders for clues on who may be favoured in the political transition ahead.

For instance, Li Keqiang’s trip to Hong Kong in August, in which he represented the State Council, was said to augur well for his personal future.

Alternatively, it has not gone unnoticed that neither Hu Jintao or Wen Jiabao has visited the city of Chongqing since the hugely-ambitious Bo Xilai became its party boss in 2007.

But at least Bo’s position is said to have been buoyed by the appearance of former president Jiang Zemin at a celebration event for the 1911 Revolution in July.

Why? Jiang was a friend of Bo’s father (the respected party elder Bo Yibo) and is still seen as something of a political kingmaker, having pushed for Xi Jinping to take over from Hu as president.

And the final message…

Foreign business people have grown more accustomed to thinking of China as a place of business, and less about politics, in recent years. But the coming 12 months will see political currents flow much closer to the surface again. Decisions will be deferred, and power struggles will ignite, as the different factions jockey for position.

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