TAKEDOWN OF SHANGHAI PARTY BOSS GETS ATTENTION OF

C O N F I D E N T I A L SECTION 01 OF 03 BEIJING 020986

SIPDIS

E.O. 12958: DECL: 09/29/2031
TAGS: PGOV CH
SUBJECT: TAKEDOWN OF SHANGHAI PARTY BOSS GETS ATTENTION OF
OTHER LOCAL DONS AND SETS TONE FOR PARTY PLENUM

REF: A. BEIJING 20360

B. BEIJING 20677

C. SHANGHAI 6381

D. SHANGHAI 6344

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

SUMMARY
--------------


1. (C) The significance of the sacking of Shanghai Party
Secretary and Politburo Member Chen Liangyu this week lies in

SIPDIS
the shock effect it will have on headstrong local leaders who
put their parochial (and sometimes personal) interests ahead
of their responsibilities to the central leadership,
Beijing-based contacts asserted. While they allowed that
Chen has long been targeted for removal by President Hu
Jintao and that his ouster clearly shows that Hu's authority
is ascendant, they stressed that viewing Chen's sacking as a
power play aimed at cutting down the Shanghai faction is
oversimplified. Chen himself had come to symbolize the
problem of local Party dons who flout the center's
directives, and run their fiefdoms with impunity.
Implication in a serious corruption scandal was a pretext for
bringing Chen down, but had the added benefit of making him
indefensible and dovetailed with the Party's continuing
anti-corruption mantra, lending popular support to the ouster
and drowning out any speculation about power politics. All
contacts with whom we spoke said Chen's dismissal was a
consensus decision done with the approval of Jiang Zemin and
other leaders. What President Hu might have offered to get
others' support remains an open question. Regardless, the
Center now has local leaders' attention on the eve of the
October Party Plenum and has set the tone for what will be
seen as the Hu era. End Summary.

BEIJING ABUZZ WITH TALK OF CHEN'S DISMISSAL
--------------


2. (C) Political circles in Beijing are abuzz with talk about
the dismissal of Shanghai Party Secretary Chen Liangyu.
Contacts with whom poloffs have spoken this week were
unanimous is arguing that Chinese leadership politics is a
highly complex game. They saw a variety of motives behind
Chen's takedown and were generally dismissive of media
reports that focused solely on Chen's demise as a power play
by Hu Jintao to smash the Shanghai faction and move his
cronies into place in advance of next fall's leadership
shuffle at the 17th Party Congress.

CENTER'S REASSERTION OF AUTHORITY
--------------


3. (C) Chen's sacking was designed to reassert the center's
authority and send a clear message to local leaders that
flouting of central directives, especially on economic
retrenchment, will no longer be tolerated, according to two
contacts. According to Zhang Xiantang (protect),a senior
editor at the State Council Development Research Center paper
China Economic Times, Chinese society and its political
interest groups are increasingly complex and fragmented.
Everyone is out for themselves, Zhang said, and no one looks
out for the interests of the entire country or the "common
man." Hu Jintao and the collective leadership have
recognized that they are in danger of losing control, Zhang
argued, so they decided to act decisively to reassert the
Central Government's authority.


4. (C) In a separate conversation with Huang Shan (protect),
journalist at Caijing magazine, which wrote a prominent
investigative article on the Shanghai pension fund scandal in
August, Shanghai set the "worst example" by blatantly
ignoring central directives on economic retrenchment,
especially in its real estate market. Shanghai is far from
the only locality guilty of ignoring the center's directives,
Huang averred, but humbling that city's Party Secretary is
perhaps the most effective way to get the attention of other
unruly local leaders elsewhere in China. Referring to the
Chinese idiom, "kill the chicken to scare the monkeys," Zhang
asserted that taking down the Party Secretary of China's
largest city sends a clear message to other local leaders
that if they continue to defy Beijing, the center will not
hesitate to use the "crudest of means" to bring them down.

WHEN CORRUPTION IS BEAUTIFUL
--------------


5. (C) Contacts differed on the role that the corruption
charges against Chen played in his downfall, but the official
spin is clearly tied to the anti-corruption angle. Zhang and

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Huang said the focus on the corruption charges was merely
"propaganda" designed to cover the center's real motives and
gain public support for Chen's removal. Toppling a corrupt
leader is sure to win popular support, they noted,
acknowledging that corruption is a major issue that presents
a real threat to Party legitimacy. Nevertheless, there are
hordes of corrupt leaders in China, Huang asserted, so
corruption alone can not explain Chen's downfall. The
corruption scandal makes it a "neat and beautiful package,"
Zhang argued.


6. (C) Cao Huayin (protect),Deputy Secretary General of
Zheng Bijian's China Reform Forum, hewed more closely to the
Party line, arguing that corruption is precisely the reason
that Chen was dismissed. The Party is truly serious about
cracking down on corruption, he declared. Removing Chen,
just before next month's Plenum, sends a clear message to
other leaders that, this time, the Party is serious about
stamping out corruption. He dismissed factional politics as
a motive. If Hu really wanted to "smash" the Shanghai
faction, Cao argued, there are "bigger fish to go after" than
Chen Liangyu.


7. (C) Journalist for China Newsweek Wang Gang (protect)
asserted that the Shanghai case comes amid a stepped-up
Central effort to combat corruption following scandals in
Tianjin and Beijing. Wang, who is from Shanghai and
previously worked on Shanghai Party Committee-controlled
newspaper, railed against Chen, citing his arrogance,
cronyism and iron-fisted control of the Shanghai political
machine. Wang stated that the scandal would continue to
unfurl, netting many other important Shanghai officials
before it was over. On September 28, Chinese media reported
that the head of Chen's office, Sun Luyi, had been detained
and was "assisting investigators." Huang insisted, however,
that it would go no higher than Chen. Politburo Standing
Committee members are "gold plated," he said in an indirect
reference to the ailing Executive Vice Premier Huang Ju, who
was also rumored to be implicated in the scandal.


8. (C) Former Farmer's Daily editor-in-chef and political
insider Zhang Guangyou (protect) told poloffs that while the
scandal could not be viewed outside the prism of China's
power politics, the current leadership is serious about
fighting corruption in an attempt to ensure social stability.
Shanghai had become a "cesspool" of corruption and abuse of
power, Zhang stated. The problem became too blatant to gloss
over, he said, but then stressed that even the act of
removing the Shanghai Party Secretary would, in the long run,
have little effect on corruption.

JIANG'S CHOP
--------------


9. (C) Hu Jinto's positon is undoubtedly strengthened by
Cen's downfall, but contacts argued that this was a decision
that had broad-based approval, including from Jiang Zemin.
Several posited that Hu had to cut deals to buy other
leaders' agreement to Chen's sacking, though they said the
details "will never be known." Zhang Xiantang guessed that
Hu made a deal directly with Jiang Zemin, possibly over
changes in the Politburo Standing Committee that will be
unveiled at next fall's Party Congress. Huang Shan also
thought that Hu would have been forced to "purchase" the
agreement of other leaders, but he viewed the whole process
as more complex. Interest groups among the leadership break
down along overlapping lines defined by business interests,
geographic ties, ideology, and old-fashioned cronyism, Huang
stated.


10. (C) In any case, contacts we spoke with agreed that Hu
Jintao could not have engineered Chen's sacking on his own as
a blatant power play. Huang observed that such a move would
simply not fit Hu's cautious style and would be "avenged" by
Hu's opponents in the future. Hu understands that he will
gain the most from this move by not overplaying his hand,
Huang said, who predicted that Hu would appoint a "neutral"
figure to take over the Shanghai leadership.


11. (C) Chen Liangyu may have been vulnerable for other
reasons. Huang noted that the position of Chen's Shanghai
protectors has weakened over the past year. With Jiang Zemin
no longer occupying formal positions of authority, and
Politburo Standing Committee member and Jiang ally Huang Ju
ill with cancer, Chen probably looked like an easier target
than before. In addition, Zhang claimed, Chen is widely
disliked. He is known to be "overbearing and high-handed,"
and the Party has long received a stream of complaints about
his behavior in Shanghai. That may have made other leaders
reluctant to come to his defense. Zhang commented that it
also is in the interests of all the top leaders, including

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Jiang, to see that "things do not spin out of control."

TIMING TIED TO PLENUM
--------------


12. (C) The timing of Chen's dismissal is directly tied to
the Party's Sixth Plenum that will open on October 8, all
contacts agreed. There is no doubt that the Party has the
attention of local leaders now, Zhang Xiantang argued. Prior
to Chen's sacking, local leaders would have been inclined to
continue ignoring the center and not attach much importance
to the Plenum. In light of Chen's "brutal" dismissal, he
argued, Central Committee members will show up at the Plenum
paying close attention to events and more inclined to follow
orders. Both Cao and Huang Shan shared this assessment,
noting that, regardless whether the objective was to reassert
the center's authority or to tackle corruption, sacking Chen
right before the Plenum was timed for maximum effect.

MEDIA MUZZLED
--------------


13. (C) Media coverage of the Shanghai story has been
carefully controlled and designed to emphasize the Party's
anti-corruption campaign and the "unanimous" support Chen's
dismissal has received from other leaders, including those in
Shanghai, and from the general public. Media contacts state
that on Monday the Propaganda Department issued strict
guidelines for coverage of the Shanghai reshuffle. The rules
centered around the "three don'ts":

-- Don't disrupt relations among leaders;
-- Don't disrupt relations between current leaders and past
leaders;
-- Don't disrupt relations between central leaders and local
leaders.

Several journalists have told poloffs that there is a
blackout on coverage that strays from official Xinhua
reports, even though many journalists are chomping at the bit
to cover the story. One journalist noted that several
bloggers had changed the title of their blogs to include the
phrase "disrupt relations" in a show of black humor.

STAGE SET FOR OPENING OF PLENUM ON OCTOBER 8
--------------


14. (C) Having timed this to get the attention of Party
members prior to the Party's annual gathering, the stage is
now set for the Plenum to open October 8 in Beijing. While
personnel discussions at Plenums are rarely made public,
Zhang argued that any change in the membership of the
Politburo Standing Committee (PBSC) is unlikely and will
occur only at next year's Party Congress. There will,
however, likely be discussion of the general parameters of
next year's changes, such as the size of the PBSC and
qualifications for new Politburo members. Decisions
regarding Chen's status as a Politburo member will also be
discussed, he said. (Note: Chen is currently suspended from
the Politburo. End note.) On policy changes at the Plenum,
contacts said there would be no major departures from the
current line, although the official theme, "Harmonious
Society," will be further emphasized and clarified. The
basic message will be, now that we've got your attention,
here's the direction we want to go on policy and we expect
you all to toe the line, Zhang said.

COMMENT
--------------


15. (C) In China, every corruption case is political. The
Chen Liangyu case is clearly no exception. With corruption
so widespread, virtually any leader can be brought down at
any time. Hu's desires to take out Chen have long been
rumored and having done so clearly enhances Hu's stature.
Nevertheless, Hu could not have achieved this stunning
outcome without widespread support. Taking out Chen
underscores the Center's seriousness on anti-corruption,
strengthens Hu's position and reasserts the principle of
localities' fealty to the Center. Hu has gotten the Party's
attention and dramatically set the tone for what will be seen
as the Hu era.
SEDNEY