Ever decreasing circles

Exposure of the Shanxi Gang brings down another political heavyweight

File photo of Ling Jihua during a plenary meeting of the 12th CPPCC at the Great Hall of the People in Beijing

New Gang of Four? Ling is said to be leader of the “Shanxi Gang”

In Hong Kong’s most high-profile corruption trial of recent times, the territory’s former number two official Rafael Hui was sentenced last month to seven and a half years in prison. Thomas Kwok, a tycoon who controls Hong Kong’s largest real estate developer Sun Hung Kai, was also given five years for bribing Hui.

“There has been a perception for many years of a culture in Hong Kong of government and business leaders cozying up to one another. Regrettably, this case will have done nothing to dispel that perception,” suggested Judge Andrew Macrae when handing down the sentences. The Briton also noted that it was crucial for Hong Kong to be “corruption free” and added that China is determined to “eradicate the cancer of corruption”.

Coincidentally, on the same day that Hui learned of his sentence in Hong Kong, the fate of another political heavyweight was also announced. Ling Jihua, vice president of the Chinese People’s Political Consultative Conference and head of the Party’s United Front Work Department, was placed under investigation for “suspected serious disciplinary violation”, Xinhua said in a brief statement.

Although it has been a hectic year for China’s graftbusters, Ling is not just another catch. The 58 year-old is best known as the political fixer of former Chinese President Hu Jintao. He was considered a rising political star until March 2012, when his son died in a high-speed Ferrari crash. Ling was said to have tried to cover up the scandal, which became a gamechanger for Beijing’s leadership transition (see WiC207).

Ling’s fall from grace, Taiwan’s China Times notes, completes the decimation of the latest incarnation of China’s “Gang of Four”. The original reference is to the foursome led by Mao’s wife that promoted the ruinous Cultural Revolution. Today, it refers to a group of senior political figures brought down by graft cases: former public security tsar Zhou Yongkang, former Chongqing boss Bo Xilai, the People’s Liberation Army’s former number two Xu Caihou, and Ling himself.

China’s state media refrains from using the same description but has nevertheless taken the rare step of admitting conflicts between different factions within the Party.

The cliques, the People’s Daily noted, are linked to the widespread corruption currently being targeted by Chinese President Xi Jinping’s anti-graft campaign. “Some cliques of officials are, in fact, parasitic relationships for the conveying of benefits,” the newspaper commented.

The official Xinhua news agency then went as far as naming three of the groups that have been flanking the disgraced Ling and Zhou.

The “Secretary Gang”, it suggests, included several top aides and former personal secretaries of Zhou.

The “Petroleum Gang” included the former Party boss of CNPC Jiang Jiemin as well as his subordinates.

Ling, meanwhile, was a member of the “Shanxi Gang”, Xinhua says.

(Other commonly discussed factions, such as the “Princeling Gang” and “Shanghai Gang”, weren’t mentioned.)

Ling had spent seven years of his career in Shanxi, where a political storm has been brewing for some time. A slew of scandals had already brought down at least seven top officials (see WiC251). The detainees include Ling’s brother Ling Zhengce.

The cliquish culture isn’t confined to Party officials. Just like Rafael Hui’s case in Hong Kong, it is collusion between civil servants and leading businessmen that has proven the most detrimental to the public interest.

For instance, Ling’s detention has reignited talk of a mysterious underground organisation known as the “Xishan Club” (a play in Chinese characters on ‘Shanxi’). The faction was said to be led by Ling, and comprised senior officials (many linked to Shanxi province) as well as business tycoons with common interests.

The “Xishan Club” first came to public attention when respected journalist Luo Changping reported its existence in 2013. According to Luo, the club was formed around 2007 and its participants would meet for networking banquets at least once every three months. Officials were shuttled to and from the venue in luxury cars. Mobile phones, secretaries (and even mistresses) were banned. Luo says the “Xishan Club” isn’t a political gathering but that its members shared similar objectives and business interests. A ticket to the organisation, Luo said, was “a shortcut straight up China’s ladder of political power”.

The claims gained credibility when a member of the club identified by Luo ­– Liu Tienan, a former deputy director of the National Development and Reform Commission ­– was charged with taking bribes in 2013 (see WiC213).

It is, of course, difficult to prove the existence of such powerful networks. However, several prominent businessmen reported to be close to Ling have looked to be in trouble since his detention was officially announced. For example, the shares of the first construction company to IPO in China, Zhejiang Guangsha, were suspended on the first trading day of 2015. Chinese media said Lou Zhongfu, the founder of the company, was taken away by anti-graft investigators in late December. The Paper, another state news portal, reported this week that Lou is said to enjoy close business relations with Ling’s wife.

Leading executives of the Founder Group were also questioned by authorities after allegations of insider trading and misappropriating company assets worth “several dozen of billion yuan”, Shanghai Daily reported this week.

The executives are said to be linked to the investigation into Ling, the newspaper reported, citing other Chinese media.

Founder, set up by Peking University in 1986, has six listed subsidiaries involved in information technology, healthcare, real estate and finance. Investors are now watching grimly to see how the fiasco will unfold.

Meanwhile, the Global Times believes that graft is a growing concern in Hong Kong too, as highlighted by Rafael Hui’s corruption case. Its interpretation of the problem was somewhat different to others, however. “This is closely connected to the non-interventionist economic policy implemented by the Hong Kong government, which leaves business decisions in the hands of property developers and tycoons,” it surmised of the situation.

© ChinTell Ltd. All rights reserved.

Sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.