Identifier
Created
Classification
Origin
07SHANGHAI101
2007-02-14 07:22:00
SECRET
Consulate Shanghai
Cable title:  

PRE-PARTY CONGRESS INFIGHTING OVER PERSONNEL INTENSIFIES

Tags:  PGOV PINR EINV ECON CH 
pdf how-to read a cable
VZCZCXRO7011
RR RUEHCN RUEHVC
DE RUEHGH #0101/01 0450722
ZNY SSSSS ZZH
R 140722Z FEB 07
FM AMCONSUL SHANGHAI
TO RUEHC/SECSTATE WASHDC 5543
INFO RHEHNSC/WHITE HOUSE NATIONAL SECURITY COUNCIL WASHINGTON DC
RUEHOO/CHINA POSTS COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHGH/AMCONSUL SHANGHAI 5900
S E C R E T SECTION 01 OF 06 SHANGHAI 000101 

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E.O. 12958: DECL: MANUAL REVIEW
TAGS: PGOV PINR EINV ECON CH
SUBJECT: PRE-PARTY CONGRESS INFIGHTING OVER PERSONNEL INTENSIFIES

REF: A) 06 SHANGHAI 6957; B) SHANGHAI 23; C) 06 SHANGHAI 5219; D) BEIJING 618

SHANGHAI 00000101 001.2 OF 006


CLASSIFIED BY: Kenneth Jarrett, Consul General, U.S. Consulate,
Shanghai, Department of State.
REASON: 1.4 (b),(d)



S E C R E T SECTION 01 OF 06 SHANGHAI 000101

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SIPDIS

E.O. 12958: DECL: MANUAL REVIEW
TAGS: PGOV PINR EINV ECON CH
SUBJECT: PRE-PARTY CONGRESS INFIGHTING OVER PERSONNEL INTENSIFIES

REF: A) 06 SHANGHAI 6957; B) SHANGHAI 23; C) 06 SHANGHAI 5219; D) BEIJING 618

SHANGHAI 00000101 001.2 OF 006


CLASSIFIED BY: Kenneth Jarrett, Consul General, U.S. Consulate,
Shanghai, Department of State.
REASON: 1.4 (b),(d)




1. (S) Summary. According to multiple East China contacts, the
central party leadership was increasingly split over personnel
issues and would only become more fractured with the approach of
the 2007 Party Congress. Vice President Zeng Qinghong was
trying to work out a compromise that would allow him to remain
on the Politburo Standing Committee despite having surpassed the
"mandatory" retirement age of 68. Moreover, President Hu
Jintao, bolstered by the death of party elder Bo Yibo, was
trying to sideline other leaders who had been allied with former
President Jiang Zemin and was conducting secret investigations
into their activities and those of Jiang's family. Hu had
already successfully removed Huang Ju from a position of
influence with an internal party resolution banning Huang from
all Politburo meetings and stripping him of his portfolio.
Those currently expected to be promoted--possibly to the
Politburo Standing Committee--included Liaoning Party Secretary
Li Keqiang, Zhejiang Party Secretary Xi Jinping, Jiangsu Party
Secretary Li Yuanchao, and Trade Minister Bo Xilai. End summary.

SIPDIS

--------------
Leadership Struggle Reaching New Heights
--------------


2. (S) On February 2, Nanjing University Philosophy and Law
Professor Gu Su said that top level leadership infighting was
increasingly "violent" and almost to the status of an "open
struggle." During a February 5 conversation, Shanghai People's
Congress Researcher Ms. Zhou Meiyan agreed that there was a
growing division within the leadership over personnel issues,
centering around President Hu Jintao and former President Jiang
Zemin and his proteges. Gu said it was natural for fractures in
party unity to intensify in the six months prior to a Party
Congress and expected that the fighting would get much uglier in

the next few months.

--------------
Zeng Wants the Presidency
--------------


3. (S) Gu said that Vice President Zeng Qinghong was fighting
for his political survival. He referenced a January 10 Reuters
report that cited "Beijing sources" as trying to convince Hu to
abdicate the presidency in favor of Zeng. According to Gu's
Beijing contacts, Zeng himself was trying to wrest the title
from Hu in an attempt to stay on the Politburo after the 17th
Party Congress. Zeng had played a key role in assisting Hu get
rid of both former President Jiang Zemin and former Shanghai
Party Secretary Chen Liangyu and felt that Hu owed him a favor.
However, Hu was unwilling to relinquish the title of
"President," in part because of the 2008 Olympics. Hu did not
want to give up the chance to burnish his international image as
a world-class leader. Since neither the Party Secretary nor the
Chairman of the Central Military Commission (CMC) titles would
allow Hu to interact with other world leaders, Hu was unwilling
to simply be the power behind the curtain while Zeng enjoyed the
international limelight. Zhou said that it would be unthinkable
for Hu to voluntarily give up the title. Even though it was a
figurehead position with little real authority, Hu would not
want to give up the one position that allowed him to interact
with foreign leaders.


4. (S) According to Gu, Zeng had ultimately been responsible
for planting the story in Reuters in an attempt to bring
international attention to the issue and hence greater pressure
on Hu to find a way to keep Zeng on the Politburo. Zeng's
supporters were arguing behind the scene that Hu had no right to
hold all three titles. Hu had invoked former paramount leader
Deng Xiaoping's example of completely retiring and standing down
from the CMC to pressure Jiang to step down. Now, Zeng's
supporters were arguing that Hu should also follow Deng's
example and give up the presidency, noting that Deng never held
all three titles and chiding Hu, saying "which Deng Xiaoping are
you emulating?"


5. (S) Gu said that according to the "68 rule," which had been
applied to Politburo members in previous instances (i.e., if
Politburo members were over 68 at the time of the Party
Congress, they needed to retire),Zeng would need to step down
at the 2007 Party Congress. The only way for Zeng to remain was
either if the Politburo agreed to make an exception to the rule
for Zeng or if he was granted the title of President, Party
Secretary or CMC Chairman, the holders of which were allowed to

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stay on if they were 70 or below. (Note: The age "rules"

SHANGHAI 00000101 002.2 OF 006


referred to by Gu above are informal norms observed in recent
years within the Party. To the best of our knowledge, such
norms have never been codified or adopted as Party "rules." End
note.)

--------------
Zeng Qinghong: The Man With the Files
--------------


6. (S) According to Gu, Hu's advisors were currently split on
how to handle the situation, with some saying Hu should find a
compromise solution that allowed Zeng to stay on as a reward for
his demonstrated loyalty and assistance. Others, however,
argued that Zeng was too dangerous to keep on board. Hu and
Premier Wen Jiabao tended to side with the latter advisors.
Zeng, as Jiang's hatchet man and head of the Organization
Department for many years, had access to the personnel files of
all of the top leaders, including all of their secrets. Hu and
Wen were leaning towards those who argued that the longer Zeng
stayed in power, the more likely he was to cause trouble. Gu
compared Zeng to Kang Sheng, the infamous head of the secret
police under Mao Zedong, noting that "such a figure cannot have
a happy ending" in the Chinese political system.


7. (S) During a February 8 conversation, JP Morgan China Vice
President and Treasurer Andrew Zhang characterized Zeng as a
"palace eunuch" who was entrusted with significant power and
answered to both Hu and, to some extent, Jiang. Separately on
February 8, Carlyle Group Managing Director and Chief China
Representative Luo Yi said he thought it would be better if Zeng
were running the party rather than Hu. Zeng was more decisive
and had a stronger power base.

--------------
Hu Fights Fire With Fire...
--------------


8. (S) According to Gu, Hu had made his share of enemies as
Party Secretary. Many provincial leaders in Guangdong,
Zhejiang, Fujian, and Shanghai disliked Hu for his economic
policies that tended to negatively impact their vested
interests. Also, Jiang Zemin and many of his proteges were
counted among Hu's enemies. Andrew Zhang said that Jiang's
influence was fairly constrained now. He had made a deal with
Hu over the summer to cooperate with the Chen Liangyu ouster in
exchange for guarantees of protection for his sons and nephew,
who was currently the police chief in Shanghai (Ref A). Gu said
although Jiang himself was "not so strong" anymore, he still
maintained some influence. Moreover, many of his proteges, who
stood to lose out at the Party Congress unless Hu's power was
checked, were beginning to feel desperate and were more willing
to fight. Ms. Zhou agreed that Jiang did, indeed, retain some
influence in Chinese politics.


9. (C) Zhang said he did not believe Hu feared Zeng on the
presidency issue. He noted that the same day as the Reuters
report was issued, Hu made a speech to the Central Discipline
Inspection Commission (CDIC) to discuss the anti-corruption
campaign. Zhang viewed the speech as Hu pointedly telling
everyone in the party that he was unquestionably in charge.


10. (S) Moreover, Gu noted that Hu had ordered the re-arrest of
Shanghai real estate tycoon Zhou Zhengyi in December because of
Zhou's connections to both Chen Liangyu and Jiang Zemin's elder
son, Jiang Mianheng, who was closely tied to Zhou through
several real estate deals (Ref B). Indeed, at Hu's behest, the
CDIC was currently "seriously investigating" Jiang Mianheng.
Because of the sensitivity of the case, information was not
being published, but was going directly to Hu. As Gu said,
"it's up to Hu what to do with it." (Comment: Hu's
reinvestigation of Jiang Mianheng, if true, would give Hu
increased ammunition to use against Jiang, should Jiang forget
their "agreement" and attempt to be more active on personnel
issues. It may also suggest that Hu believed that Jiang's
influence was still significant enough that Hu needed to
actively check it in the run up to the Party Congress. End
comment.)


11. (C) Gu opined that Hu was likely behind the removal of
filters on internet searches connecting Jiang Mianheng to Zhou
Zhengyi and Chen Liangyu reported in a January 28 "Asia Weekly"
(Yazhou Zhoukan) article. Although he had not personally tried
to run a search, Gu said that the removal of the filters would
be a "significant" development. On February 3, Poloff searched
"Jiang Mianheng" and both "Zhou Zhengyi" and "Chen Liangyu" in
Chinese from his home computer. Several recent and past
articles linking the men together with scandals did, indeed,
show up under Google search results, including links for such
dissident sites as "Secret China," "Renminbao," and the
Falungong-controlled "Peace Hall" and "Epoch Times." While

SHANGHAI 00000101 003.2 OF 006


Poloff could read the summaries of the articles, none of the
articles would load. Ms. Zhou discounted the appearance of such
links as a political phenomenon. Zhou had also performed
similar searches at home and attributed the results to
information overload, noting that it was impossible for search
engines to completely block the results, although they could
effectively block the content.

--------------
...and Maybe Some Water
--------------


12. (S) Carlyle's Yi Luo discounted the Reuters article on Zeng
seeking the Presidency, noting that he had heard that a deal had
been struck allowing Zeng to stay on as head of the Chinese
People's Political Consultative Conference (CPPCC). He said
that the position would provide Zeng rank, status, and
power--and presumably age limits--comparable to that of
president, although it was less important from an international
perspective. On the same day that Luo relayed this information,
albeit several hours later, Reuters published another article
saying that, indeed, such a deal had been proposed and "Zeng's
political fate would be finalized" during the summer leadership
meetings. According to the press report, Hu made the offer as a
counter to calls for Zeng to take over the presidency.

--------------
Hu Wins the Elders
--------------


13. (S) According to Gu, Hu's influence received an unexpected
boost with the death of party elder Bo Yibo. Although Bo had
not actively opposed Hu, he had been one of Jiang's most ardent
supporters because of Jiang's willingness to help promote Bo's
son, Trade Minister Bo Xilai. Bo Yibo had helped Jiang, for
instance, formulate and sell the "68 rule" in order to rid Jiang
of one of his top rivals, Qiao Shi, at the Party Congress in

1997. While the elders' role in politics has been diminished
over the past decade, they still had some political influence.
With the senior Bo's passing, party elder Wan Li, who strongly
favored Hu, had now become the top elder. Hu was also being
supported by party elders Qiao Shi and Li Ruihuan. Qiao was the
patron of CDIC Chairman Wu Guanzheng. Although generally seen
as a neutral figure in factional politics, Wu was nonetheless
providing critical assistance to Hu.

--------------
Throwing the Princelings a Bone
--------------


14. (S) Gu said that Hu recognized he needed to maintain good
relations with the elders by promoting some princelings to
high-level positions. Hu, for instance, supported promoting Bo
Xilai to the Politburo and a Vice Premier position, possibly to
replace Wen as Premier after Wen stepped down in 2013. Hu also
supported transferring Zhejiang Party Secretary Xi Jinping to
Beijing as a Politburo member and possibly Vice Premier in
charge of industry. Hu did not see these men as a threat to
him. Moreover, promoting them played well with many elders who
were concerned that the children of veteran party leaders needed
leading roles themselves in order to protect the interests of
the Party and the elders.


15. (S) Luo and Zhang agreed that Xi was moving to Beijing.
Luo said that the Zhejiang Governor's son had recently told him
of the transfer. Zhang noted that Xi was a contender for a slot
on the Politburo Standing Committee (PBSC). Regarding Bo Xilai,
Zhang said Bo was positioning himself and being considered for a
promotion, noting that while Bo was not particularly well-liked
by foreigners, he was respected within the Chinese bureaucracy.
Luo concurred that Bo wanted to move up, assessing that he is
open and capable, but added that friction between Bo Yibo and Hu
Jintao had led Hu to dislike Bo Xilai.

--------------
Huang Ju: Sidelined and Moving Out
--------------


16. (S) One of the issues being most hotly contested was who
would fill Huang Ju's position as Executive Vice Premier with
responsibility for economic policy. Gu said that while some
were still saying that Huang was almost dead, he believed that
Huang was not that sick and that there was a major political
element to his "illness." Huang had been closely tied to Chen
Liangyu's misdeeds and many had argued that since Chen had been
arrested, Huang was no longer fit to hold a leadership position.
Indeed, Gu said that three or four months ago, the party passed
an internal resolution banning Huang from attending Politburo
Standing Committee meetings and stripping him of his leadership
responsibilities because of his "economic problems." According

SHANGHAI 00000101 004.2 OF 006


to the resolution, for the sake of appearances, Huang would
retain his titles, although he had effectively been fired. Gu
confirmed other reports that Huang had returned to Shanghai.


17. (C) Zhang said that Huang would be replaced as Vice Premier
at the National People's Congress. Luo believed that it would
not happen that quickly, unless Huang died first. Instead,
Huang would be dealt with at the Party Congress. Luo heard that
Huang was genuinely ill and had asked to travel to the United
States for treatment but had been denied by party leaders. At
any rate, Luo said, Huang "clearly has no influence." (Comment:
Other sources have also recently told us that Huang Ju was near
death. End comment.)


18. (C) Zhang said the two top contenders to replace Huang were
People's Bank of China President Zhou Xiaochuan and Finance
Minister Jin Renqing. Zhang said that Zhou was seen as too
focused on international issues and not enough on domestic
problems. Jin, on the other hand, was seen as more focused on
domestic interests, which many Chinese economists and economic
policymakers saw as necessary.


19. (S) Luo discounted either Zhou or Jin as strong candidates
and said that Beijing Mayor Wang Qishan was the front runner for
the job. Wang was well regarded and had strong economic
credentials. Luo said that his friend and his friend's father,
who Luo said was the head of the Taiwan Affairs Office and a
senior leader, had recently had dinner with Zeng Qinghong and
Wang Qishan. Luo said that it was made clear at the dinner that
Wang was being considered for Huang's job. Luo described Wang
as capable, open, and progressive. He noted that Wang had
strong financial credentials, having served as a deputy governor
of the People's Bank of China and a former vice governor of
Guangdong Province.

-------------- --------------
Hu Pushing Jiang Supporters Out; Playing the Corruption Card
-------------- --------------


20. (S) According to Gu, Hu had also ordered secret CDIC
investigations into PBSC members Jia Qinglin and Li Changchun
and was using the evidence collected to force their resignations
at the upcoming Party Congress. Li supposedly had "mafia"
connections from his days in Liaoning and corruption problems
from his days in Henan. Hu and Wen on several occasions had
confronted Li with the information they had received leading Li
to tender his resignation on several occasions. Hu had rejected
his offer up to this point to keep a face of unity on the Party
but intended to force Li out at the Party Congress. Hu had not
yet decided if he would allow Li to be prosecuted at a later
date. Gu also noted that Hu disliked current Organization
Department head Wang Gang and hoped to move him to a ceremonial
position. Wang had been too closely associated with Jiang.

--------------
Dirty Deeds and They're Done Dirt Cheap
--------------


21. (S) Zhang claimed that Hu was untouchable from the
corruption standpoint in that he, his wife, his son, and his
daughter were all clean. As a point of comparison, he noted
that both Zeng Qinghong and Vice Premier Zeng Peiyan were of
"the same type but for a different price." He noted that the
base rate to purchase influence with Zeng Qinghong was around
500,000 RMB, while it only cost 50,000 RMB for influence with
Zeng Peiyan.

-------------- --------------
Wen Jiabao: Great Administrative Assistant, Lousy Leader
-------------- --------------


22. (S) Gu noted that there was no daylight between Hu and Wen
on policy or personnel issues. According to Zhang, Wen operated
as a "butler, a personal secretary, or a staff assistant" to Hu.
He made sure that all the paper was in order, but was not,
himself, decisive nor was he a strategic thinker. Zhang noted
that Wu Yi had been a primary contender for Wen's position at
the last Party Congress but that Jiang had blocked her from
taking on that position. Wu had more support and respect than
Wen did throughout the leadership.

--------------
Li Yuanchao: Leaving Jiangsu
--------------


23. (C) On February 2, Nanjing University History and
Anthropology Professor Hua Tao said there were concrete signs
that indicated Li Yuanchao might be promoted soon. While
initial rumors had him going to Shanghai as Party Secretary,
lately people had been saying Li would move to Beijing. Hua

SHANGHAI 00000101 005.2 OF 006


noted that Li Mingchao had recently been transferred to Jiangsu
as Deputy Party Secretary. Li Mingchao was originally from
Jiangsu, where he had worked as director of the Jiangsu Public
Security Bureau. From there, he had transferred to Yunnan as
Deputy Party Secretary. Hua understood Li Mingchao's lateral
return to Jiangsu indicated he was in line to replace Li
Yuanchao.


24. (S) Gu said that according to recent rumors, Jiangsu Party
Secretary and Hu protege Li Yuanchao was heading to Beijing and

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the Politburo with a concurrent post as either head of the
Organization Department or Director of the General Office.
Zhang expected that Li had a good chance at winning a slot on
the Politburo Standing Committee. Luo said that Li had told
mutual friends in Beijing that he expected to be going back to
Beijing soon. It was not clear, however, if it was to head the
Organization Department or to take up a position as vice
premier.


25. (C) On February 2, Nanjing University Sociology Professor
Zhou Xiaohong relayed that he too had heard Li Yuanchao would be
leaving Jiangsu as either head of the Organization Department or
Shanghai Party Secretary. Li had good leadership skills and was
very low key. Professor Zhou acknowledged that it would be
difficult for an outsider to govern Shanghai and said that there
was some basis for sending Li there as a "Shanghainese." Zhou
said that Li's father had served as a vice mayor of Shanghai
during the Mao Era or early Deng Era. Separately, William Doo,
a senior executive with the Hong Kong-based New Century real
estate development company, said on February 12 that he had been
told by "informed persons" that Li had been born in Shanghai and
spent his childhood there. Shanghai's Zhou Meiyan said that it
was possible that Li's father had something to do with the
former East China Bureau (Huadong Ju) early on in the days of
the regime, but doubted he had ever served directly in the city.
Ms. Zhou, however, did not view Li as a Shanghainese, but
rather saw recent discussion of Li's Shanghai ties as efforts to
bolster Li's credibility should he end up coming to Shanghai.
(Note: Li had previously pointed out to the Ambassador (Ref C)
that his son was studying at Shanghai's Fudan University, as he
had in his youth. End note.)

-------------- ---
Li Yuanchao Happy to Discuss Anything But Taiwan
-------------- ---


26. (S) Luo described Li as very strategic, open and pro-U.S.
and joked that if China were a democracy, he would quit his day
job to campaign for Li. At a January 31 dinner with Carlyle
co-founder Daniel Daniello and Carlyle Member and former Office
of Management and Budget Director Dick Darman, Li said that
China and the United States could discuss and resolve many
different issues, from foreign exchange rates, to IPR, to the
bilateral trade imbalance. Certain issues, such as Taiwan,
however, were non-negotiable. If Taiwan provoked China, China
would have to retaliate, even "if there were another country
involved." Li expressed concern that Chen Shui-bian might "try
to do something stupid" this year. Li also asked Darman many
questions about the current political climate in the United
States, including the views toward China of Speaker Nancy Pelosi
and various U.S. presidential candidates. Li also raised
concerns about former New York City Mayor Rudolph Giuliani
because of his views on Taiwan, noting that the Mayor had warmly
welcomed Chen Shui-bian in 2001 on a stopover in New York, but
had not been available for visiting PRC officials.

--------------
Smear Campaign?
--------------


27. (S) Gu said that Zeng or his followers were likely behind
recent rumors that Li Yuanchao was coming under investigation by
the CDIC (Ref D). Gu said that his contacts were not too
concerned about the rumor, noting that Li did not appear to have
any "real problems," unlike Chen Liangyu. Gu explained that the
former "Jiang Clique" might be trying to discredit Li since he
was also a candidate to replace Huang Ju as Executive Vice
Premier, a slot that members of the "Jiang Clique" felt should
go to someone they preferred. Both Luo and Zhang agreed that
the rumor might indeed be a sign that Li was being considered
for higher positions.


28. (S) Hua Tao and Chairman of the Nanjing University Taiwan
Research Institute Professor Cui Zhiqing also dismissed those
rumors, although Hua noted that decisions on whom to investigate
were generally political decisions and that a person with even a
few problems could have difficulties if the right people wanted
to create them. Although Ms. Zhou felt that it would be
impossible for someone that close to Hu to come under
investigation, she did note that there had been a number of

SHANGHAI 00000101 006.2 OF 006


Jiangsu officials to come under CDIC investigation and arrest
over the past year, including a vice governor and head of the
Provincial Construction Department.

-------------- --------------
Hu Looking to Move His Fifth Generation Team to Beijing
-------------- --------------


29. (S) According to Gu, Hu needed to move some of his key
Fifth Generation supporters to the Politburo in order to pave
the way for them to take over the reigns when he retires.
According to Luo, one of the only people Hu had from his "team"
in a position of influence in Beijing right now was Deputy
Director of the General Office Ling Jihua. In fact, if Li
Yuanchao did not take the job as Organization Department head,
Luo assessed that it would go to Ling.


30. (S) Gu said that Hu planned to bring Liaoning Party
Secretary Li Keqiang up to Beijing as well. Both Zhang and Luo

SIPDIS
agreed with this assessment, noting that Li Keqiang was a prime
candidate for the Politburo Standing Committee. Zhang pointed
out that Li Keqiang's career had virtually mirrored Hu Jintao's.
Luo said that Li Keqiang was the clear frontrunner to move up
and potentially succeed Hu as Party Secretary.


31. (S) In a conversation with Hu's son, Hu Haifeng, Luo had
tried to point out that frontrunners did not, in fact, always
make the best candidates and often ended up not getting the job.
Luo put in a plug with Hu Haifeng for Li Yuanchao, suggesting
Hu Haifeng advise his father that Li Yuanchao should also be
considered as a successor. Separately, Luo pointed out to
Pol/Econ Section Chief that Hu Jintao, himself, had not been the
top pick to succeed Jiang, but had, instead, been the number
three choice. However, when last Luo met Li Yuanchao in late
January, Li lamented that he was not as young as the other
contenders for Hu's job.
JARRETT