SHANGHAI PARTY LEADER CHEN LIANGYU FIRED IN

C O N F I D E N T I A L SECTION 01 OF 02 BEIJING 020360

SIPDIS

SIPDIS

E.O. 12958: DECL: 09/25/2031
TAGS: PREL PGOV CH TW
SUBJECT: SHANGHAI PARTY LEADER CHEN LIANGYU FIRED IN
CORRUPTION-RELATED PROBE; HU'S SHOT ACROSS THE BOW

REF: A. SHANGHAI 6166

B. SHANGHAI 5928

C. 05 BEIJING 7392

Classified By: Classified by Political Internal Unit Chief Susan
Thornton. Reasons 1.4 (b/d).

Summary
--------------


1. (C) Xinhua News Agency announced the morning of
September 25 that Politburo member Chen Liangyu was
removed from his post as Shanghai Party Secretary by
the Politburo due to corruption allegations. A terse
Xinhua statement noted that Shanghai Mayor Han Zheng
was named Acting Party Secretary in Chen's stead. One
Beijing contact said that it is not yet clear whether
Han Zheng's appointment is temporary. Speculation
about Chen's removal from Shanghai has circulated
actively in the last two years and many believe that
President Hu Jintao has been angling to replace Chen
with a younger protege who would work more in concert
with the central leadership. It appears that Chen,
whose former personal secretary was arrested several
weeks ago, fell victim in the end to a major pension
funds scandal in Shanghai. Chen is the highest level
official to fall on corruption charges since the
takedown of Beijing Party Secretary Chen Xitong in

1995. End summary.


2. (C) Shanghai Party Secretary and Politburo member
Chen Liangyu, often cited as an opponent of President
Hu Jintao and Premier Wen Jiabao, has fallen victim to
corruption allegations and has been removed as
Shanghai Party Secretary and suspended from positions
on the Politburo and Central Committee, Xinhua
announced September 25. According to the
announcement, Chen has been implicated in the ongoing
pension funds scandal in Shanghai (Ref B) that has
already netted a number of Shanghai officials,
including Chen's former personal secretary, Qin Yu.
Qin was arrested several weeks ago and, according to
Beijing-based journalist Chen Jieren (protect),has
been held for interrogation by discipline teams in
Hunan province.


3. (C) As reported Ref C, speculation has been rife
among Chinese political elites that Chen would be
removed from Shanghai at some point. Some of the
earlier rumors about efforts to remove Chen involved
plans to move a protege of Hu Jintao's, such as United
Front Work Department Director Liu Yandong or Jiangsu
Party Secretary Li Yuanchao into the Shanghai job, in
preparation for elevation to the Politburo at the 17th
Party Congress. With current Shanghai Mayor Han
Zheng's appointment as Acting Shanghai Party
Secretary, it is not clear, according to journalist

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Chen, that a final decision has been made on who will
replace Chen Liangyu in Shanghai. While it appears
that the Central Committee will have to approve Chen's
removal from the Politburo, which will likely happen
at the upcoming Party Plenum in October, it is not
clear that the Plenum will move to fill the vacancy
left by Chen on the Politburo. (Note: The Shanghai
Party Secretary is traditionally a member of the
Politburo. End note.) Journalist Chen stated that
former Shanghai Party Secretary and Politburo Standing
Committee member Huang Ju has also been implicated in
the pension scandal, but will avoid scrutiny because
of his ongoing fight with cancer.


4. (C) Central Discipline Inspection Commission
(CDIC) Deputy Director General for Foreign Affairs
Shao Shuwang told poloffs on September 21 that the
discipline team investigating the Shanghai pension
scandal was headed by a CDIC Vice Minister and
included more than 100 people from agencies including
the Procurate, Public security and other investigative
arms. Shao refrained from speculating how high the
probe would go, but said that many high level
officials would be implicated. "Whoever is
investigated will be out of luck," she quipped. Shao
said that the Shanghai case was notable because the
misappropriation of huge sums of public funds made it
especially high profile and impossible for the
Government to ignore. She also said the Government
would bail out any losses to the public.


5. (C) The context surrounding Chen's removal is
similar to circumstances surrounding the only other
removal of a Politburo member on corruption charges,

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the arrest of Beijing Party Secretary Chen Xitong in

1995. Chen Xitong (no relation to Chen Liangyu) was a
powerful opponent of then-President Jiang Zemin, who
had high-level backing from former leaders and was
removed from the Politburo and sentenced to sixteen
years in prison on charges that many here view as
politicized. (Note: Several sources in Beijing have
recently confirmed reports that Chen Xitong has been
paroled from prison for medical reasons and is living
quietly at his home in Beijing under guard. End
note.) Chen Liangyu's stature does not rival that of
Chen Xitong at the time, but both cases will be seen
as milestones that affirm the Party chief's ability to
bring down a powerful regional leader.

Comment
--------------


6. (C) Well-sourced speculation about efforts to
remove Chen Liangyu has circulated for the past two
years. Until now, the failure to remove Chen had been
seen as evidence of Hu Jintao's incomplete authority.
Beijing contacts are not yet counting Chen's removal
as a declaration of complete victory for Hu Jintao and
say that the appointment to replace Chen will say more
about Hu's power than Chen's removal. However, Chen's
removal at long last will cause those who
underestimate Hu Jintao to think twice.

RANDT