As Trial Of Billionaire Liu Han Opens, Chinese President Xi Jinping May Go For Even Bigger Target

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Zhou Yongkang
Then China's Public Security Minister Zhou Yongkang reacts as he attends the Hebei delegation discussion sessions at the 17th National Congress of the Communist Party of China at the Great Hall of the People, in Beijing on Oct.16 2007

Prosecutors in the Chinese city of Xianning, in the central province of Hubei, have announced criminal charges against Liu Han, a powerful mining tycoon accused of murder, among other crimes, and being part of a “Mafia-style” gang with 35 others. The trial, which began Monday, has gained international attention, but it goes beyond the story of the downfall of one very wealthy Chinese.

It may become the first salvo in President Xi Jinping’s latest battle on corruption, a crackdown that may reach the highest echelons of the Chinese Communist Party. And a former Chinese president has warned that the crackdown may turn out to be so radical as to endanger the state itself.  

One of Xi’s central commitments since taking the helm in early 2013 has been his crackdown on party officials accused of corruption. Xi’s assault on “tigers” and “flies” -- a description he used for corrupt figures at all levels, from the powerful ex-regional party chief Bo Xilai to small-town administrators -- has been one of the hallmarks of his presidency, together with an emphasis on frugality and an end to the lavish lifestyle of some party officials. 

With the help of social media, the party has been able to effectively use tools like Weibo, China's equivalent of Twitter, and WeChat to rally public opinion around the party’s anti-graft efforts.

Liu Han is the most recent example of this. On Weibo, the search term “Xianning Court” became the second most searched topic just hours after the court’s official Weibo account announced the criminal charges filed against the tycoon and his associates.

The effectiveness of China’s well-oiled propaganda machine is easily visible online. Social media reaction to the court’s live updates have lauded the party for its efforts in bringing “justice and fairness” back and “safeguarding the spirit of the law.”

“The crackdown on the criminal underworld must continue,” one blogger wrote. “The central government’s elimination of corruption and crime shows strong determination; they deserve praise,” another chimed in.

The case against Liu was being built since February. The state-run Xinhua news agency reported that Liu made 40 billion yuan, or around $6.4 billion, through shady business practices, in addition to the murder charge and allegations of other criminal acts.

The downfall of Liu would undoubtedly be a win for Xi, but the party has its sights on an even bigger “tiger”: Zhou Yongkang. Zhou was the general manager of China’s National Petroleum and Natural Gas Corp., before being promoted to member of the Politburo Standing Committee, leading the domestic security bureau for 10 years before retiring in 2012. It is believed that Zhou secured $14.5 billion in assets for himself and his family through his old connections in oil, real estate and various other industries

Zhou and his family, friends, and business associates have all come under scrutiny in what appears to be a strategic takedown.

 

The End of the Shanghai Gang

Zhou has been under virtual house arrest since authorities began investigating him late last year, through what some have reported as a “task force” ordered by Xi. Though no charges have been formally filed against Zhou, insiders have said he faces violations of “party discipline.” If convicted of crimes, he would be the most senior official to be accused of corruption since the Communist Party took power in 1949. He outranked the once high-flying Bo Xilai, the party chief in the city of Chongqing who was sentenced to life in prison for corruption in 2013.

But Bo and Zhou have more in common than just being Xi’s targets for corruption. Both are members of a party faction known as the “Shanghai Gang,” made up of followers of Jiang Zemin, who served as Shanghai’s mayor before being appointed China’s president in 1989. Current president Xi, on the other hand, comes from a different faction, the Chinese Communist Youth League Gang, a group of officials who came up through the ranks of that league.

“In practical terms, there is no question that Xi’s anti-corruption drive has hit hard at what might be called the second and third generations of the old Shanghai Gang,” Andrew Wedeman, author and China political economy and corruption expert, said.

Though the Shanghai Gang may not be a power group in the strict sense, weakening the clique’s members is in Xi’s interest. “Zhou Yongkang is said to have gotten his start up the ladder to power as a protégé of Zeng Qinghong, who is said to have been Jiang Zemin’s hatchetman and one of the core members of the Shanghai Gang,” Wedeman said.

“As I see it, rather than a direct factional attack on the Shanghai Gang, Xi’s main purpose is to strengthen his own political position by taking out Zhou and his gangs. In the end, […] I think it more as a fight among the descendants of the Shanghai Gang rather than an attack on the Shanghai Gang.”

“The ongoing investigation on Zhou Yongkang and his associates has a lot to do with Zhou’s previous support to Bo. … And if in the process, the Shanghai Gang or any other regional forces are weakened, then it’s all beneficial to Xi’s leadership consolidation,” said Dr. Jiang Wenran, a professor of political science at the University of Alberta.

Now, the Shanghai Gang’s godfather, Jiang Zemin, has taken notice -- and may be warning that the consequences of a crackdown may be huge.

Monday, a report in the Financial Times claimed that Jiang had reached out to Xi, asking that he rein in the ambitious anti-corruption campaign. The report said that Jiang sent a message saying that “the footprint of this anti-corruption campaign cannot get too big,” sending a warning Xi not to take on top-level party leaders.

“On the other hand we can take it as a warning that if Xi pushes beyond Zhou, catastrophic political instability could result because Zhou is far from the only rotten apple in the leadership, both current and retired,” Wedeman said. 

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