When Rio Tinto chief executive Sam Walsh, then head of the company’s iron ore division, inked two high-profile deals with Chinalco president Sun Zhaoxue in 2010, little was he to know that just four years later Sun would be swallowed up by the Communist Party’s corruption purge and expelled.
And it was jailed former Politburo member Bo Xilai who, while minister for commerce, kicked off Australia-China free trade negotiations in 2005 and became a regular fixture with whom Australian diplomats and foreign ministers to hobnobbed in Beijing and later Chongqing.
There’s an increasing problem for foreign executives and diplomats as Chinese leader Xi Jinping’s anti-corruption campaign continues to intensify, and many believe it is also hurting the already slowing Chinese economy.
As Xi prepares for one of his biggest tests yet, the criminal trial of Zhou Yongkang, former Chinese security tsar and the highest ranking party official to be tried since the anti-corruption campaign began, it appears that the noose may be tightening around former Chinese leader Jiang Zemin.
The one-time Shanghai Party chief, who was rushed to Beijing by Deng Xiaoping in 1989 to replace sacked reformer Zhao Ziyang, has retained an enormous amount of behind-the-scenes influence in the party after stepping down in 2002. He stayed on as chairman of the Central Military Commission until 2004. The People’s Liberation Army (PLA) and China’s commercial centre of Shanghai, where he continues to preside over the powerful Shanghai clique, are seen as his two major power bases. Xi is now going after both.
These past few days China’s state-controlled media has been stuffed with stories about the anti-corruption campaign since the report of the Fifth Plenary Session of the Party’s current Central Discipline Inspection Committee (CIC).
So, to the latest targets: in the middle of last year, the CDIC sent a special team to Shanghai for several months. It’s worth noting too that Xi himself is a former Shanghai Party chief — a position that is an almost guaranteed stepping stone to the elite Politburo Standing Committee.
Along with CDIC chief Wang Qishan, Xi’s right-hand man charged with conducting the anti-corruption campaign, Xi’s main ally in the Politburo Standing Committee is Yu Zhengsheng, who, prior to his elevation to the top group in 2012, was also Shanghai Party chief — so they know as well as anyone where the bodies, or at least the treasure, are buried in the freewheeling metropolis. This would certainly be giving Jiang and his people some pause for thought.
One of the first firm indications that Jiang’s clique — if not Jiang himself — was the target of investigators was the dumping of Dai Haibo as deputy director and party secretary of Shanghai’s free-trade zone (FTZ) management committee in October. The FTZ has been involved in a land issue supervised by Jiang Miankang, Jiang Zemin’s second son. In December, Wang Zongnan, a businessman with close links to Jiang Zemin, was accused of embezzling funds while chairman of Shanghai Lianhua Supermarket Holdings Co. The ultimate target, short of Jiang himself in Shanghai, is strongly rumoured to be Shanghai’s current Party chief Han Zheng, who has been named by graft-busting Shanghai lawyer Zheng Enchong — himself the subject of a house search after blowing the whistle and suing the party chief — as Shanghai’s biggest problem.
The first shoe has also dropped in the financial services sector with the “resignation” of privately owned China Minsheng Bank president Mao Xiaofeng, who is said to be connected to the recently arrested senior official Ling Jihua, once former leader Hu Jintao’s private secretary.
Talk of a possible pincer movement on Jiang has gained moment since the revelation in state media that the party needs to conduct more “political activities” in the PLA, which is seen to be rife with corruption. This followed last June’s landmark takedown of former PLA deputy chief General Xu Caihou, who was expelled for corruption after one tonne (that’s not hyperbole) of cash was found at his home.
Still, a takedown of Jiang is certainly not a done deal, and any move to go after a former leader would be fraught for many reasons, the most compelling one being that it could hit the party’s legitimacy at its core — and would mean all bets are off, creating an environment of perhaps uncontrollable fear and loathing.
But Xi has confounded many so far. Otherwise astute observers thought that the taking down of Zhou might signal the end of the “tiger” hunt. Like other party members, Zhou was under shuanggui — a special form of house arrest applicable only to CCP members.
This is about as far away as you can get from the “rule of law” that Xi professed to desire for China — closer to rule by law, as the lawyers say. But for party members it is not even this; it’s rule by star chamber. So as admirable as Xi’s anti-corruption campaign appears to be in its stated intent, it is in reality an utterly opaque campaign, devoid of any due process. Its proponents are unaccountable to anyone but whichever chief happens to hold the upper hand in the party at the time. And as Bo and Zhou can attest, this can change on the turn of a dime.
It has been widely suggested that Zhou’s trial is likely to come this month ahead of the annual meeting of China’s rubber-stamp parliament, which among other things is expected to set a lower GDP target for the country this year. If Zhou remains locked away there will be talk that Xi may be foundering — such is the uncertainty on foot right now.
The economy showed further unexpected weakness at the weekend when the monthly Purchasing Managers Index fell below the median mark of 50, signalling a contraction in activity at the top end of China’s manufacturing sector.
Some observers believe that the anti-corruption campaign is exacerbating China’s economy, which is — in the view of some of the more perceptive economists — sicker than is widely imagined. The theory goes that the CDIC investigations are freezing parts of government where officials are in stasis for fear of making the wrong move — along with a dearth of funds that have usually greased the wheels of the bureaucracy.
When officials are taken away for investigation it seems that their projects also begin to gather dust. It’s worth noting, to close the loop, that Rio’s ventures with Chinalco both in Africa and inside China have borne little fruit so far.
So Xi is playing a high-risk game both politically and economically with his campaign. But that is likely a testimony to the depth of the problems that lie behind the opaque walls of the party. Every time a senior “tiger” is arrested, the appearance of spring cleaning must be balanced with the credibility of a party that has nurtured such a corrupt cadre for so many years. Just where does it stop?
If Xi is not careful, some observers believe the success of his campaign could lead to a pitched internal battle akin to Mao Zedong’s Cultural Revolution — if is not approaching one already. If this happens, the party may, finally, eat itself.