C O N F I D E N T I A L SECTION 01 OF 04 SHANGHAI 000225

SIPDIS

SIPDIS

DEPT FOR EAP/CM, INR/B AND INR/EAP
STATE PASS USTR FOR STRATFORD, WINTER, MCCARTIN, ALTBACH, READE
TREAS FOR OASIA - DOHNER/CUSHMAN
USDOC FOR ITA/MAC - DAS KASOFF, MELCHER, MCQUEEN
NSC FOR WILDER AND TONG

E.O. 12958: DECL: X1, MR
TAGS: PGOV PINR EINV ECON CH
SUBJECT: EAST CHINA CONTACTS ON CHINA'S SUPERVISION SYSTEM

REF: A) BEIJING 533; B) 06 SHANGHAI 3843; C) 06 BEIJING 23885

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CLASSIFIED BY: Mary Tarnowka, Political/Economic Section Chief,
U.S. Consulate, Shanghai, Department of State.
REASON: 1.4 (b), (c), (d)




1. (C) Summary. East China contacts described a multilayered
but relatively ineffective supervision system that did little to
end rampant corruption among Chinese officials. One contact
with the Shanghai People's Congress claimed the problem was
systemic and due to lack of rule of law. Another from the
Nanjing Party School said that there were too many supervision
organizations, leading to bureaucratic inefficiencies and an
inability to properly supervise government and party officials.
The Shanghai People's Congress contact laid out how
investigations run by the party's Discipline Inspection
Commission typically unfolded, to illustrate how the process was
driven by political decisions and did not, as a Nanjing contact
asserted, reflect an expression of Chinese democracy. Although
none of the contacts we spoke with were certain about what the
new State Corruption Prevention Bureau --likely to be set up
this year--would do, several expressed concern that it would
overlap with functions of already established organs and two
doubted it would have much overall impact. End summary.

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A Multifaceted System
--------------


2. (SBU) During an April 6 discussion with several Nanjing
Party School (NPS) professors, NPS Executive Vice President He
Jiaquan explained that the national Chinese supervision system
consisted of five separate parts. These included: the Central
Discipline Inspection Commission (CDIC) that investigated

internal party malfeasance (Ref A); the Ministry of Supervision
(MOS), which was the governmental mirror of the CDIC; the
Procuratorate and court system for trying cases; the media,
which played a watchdog function; and public supervision through
the National People's Congress (NPC) and the Chinese People's
Political Consultative Conference (CPPCC) systems. He noted
that on January 1, 2007, the new Supervision Law passed by the
NPC went into effect, enacting a "strict work procedure." He
also noted that Nanjing Municipality had a "Corruption
Prevention Committee" comprised of representatives of all of the
organs involved in combating corruption to coordinate the
inter-agency effort.


3. (C) During an April 17 discussion, Shanghai Municipal
People's Congress Training Department's Zhou Meiyan added a
sixth layer, explaining that the Letters and Visits system was
also a major part of the supervision system (Ref B). She noted
that of the six parts, the Discipline Inspection Commissions
(DICs) at all levels had the most power. The DICs worked with
the Procuratorate to decide which cases needed to be handled
internally within the party and not by state prosecutors. Zhou
elaborated that the Procuratorate's responsibility was to inform
the DIC of any cases involving party members. The DICs actually
made the decisions about which cases could remain with, or be
referred to, the Procuratorate and which needed to be handled
with greater sensitivity by Party investigators. Zhou said that
there was little differentiation between the CDIC and the MOS,
describing them as "one office, two placards." Both were housed
in the same office and, with the exception of the top leaders,
there was no distinction between which employees worked for
which bureaucracy. Moreover, since almost all of the government
officials that the MOS supervised were also party members, there
was no practical way to differentiate where the authority of one
organization left off and the other's began.

--------------
Just Too Many Cats
--------------


4. (C) Professor He complained that people were wondering why
there continued to be so much corruption when there were already
so many supervisory agencies. He said it appeared to be a case
of "so many cats, that they can't catch the mice," meaning that
the agencies were stumbling over each other in their efforts,
ensuring that "nothing gets done." One reason for this, he
noted, was that local DICs and Supervision Bureaus were
supervised by the localities, meaning that the anticorruption
agencies answered to those they were supposed to monitor.


SHANGHAI 00000225 002.2 OF 004



5. (C) Professor He noted that there were some recent major
examples--such as Shanghai--where Beijing moved to replace the
DIC heads with people accountable to the center, but did not
think this practice would extend much beyond its current scope.
Nanjing, however, had adopted a rule that the head of a local
DIC needed to come from outside the locality. Likewise, a
Nanjing DIC head who was promoted needed to find work outside of
the Province. He said this was not a nation-wide practice,
however.


6. (C) Ms. Zhou, on the other hand, believed that the practice
of replacing provincial DIC secretaries with Beijing appointees
would expand as the center tried to rein in recalcitrant
provinces. She believed that the relatively recent central
appointments in Shanghai, Tianjin, and Beijing would have some
marginal utility in supervising the municipal leadership since
the new DIC secretaries were answerable to Beijing. Ms. Zhou
said these new secretaries were also undoubtedly well-connected
to the Politburo, noting that she believed the new Shanghai DIC
head, Shen Deyong, was close to Vice President Zeng Qinghong
through connections in the Organization Department. Ms. Zhou
assessed that the practice of having the next administrative
level up choose the DIC secretaries of the level below would
likely eventually become standard practice.


7. (C) Zhou remained skeptical, however, that central control
over provincial DICs would do much to curb corruption in the
long run. First, unless they were frequently transferred, Zhou
believed it likely that the local DIC secretaries would still
develop relationships with those they were supposed to
supervise, making them less inclined to rock the boat. More
importantly, since supervision relied on people monitoring other
people, or organizations monitoring other organizations, rather
than adherence to and application of the rule of law, there was
simply too much room for corruption.

--------------
Anatomy of a DIC Investigation
--------------


8. (C) Professor He explained that the DIC, as a tool for
investigation, was a useful vehicle for democratic expression.
DIC investigations could be launched one of two ways. First,
every citizen had the right to submit a complaint to the Letters
and Visits Office. Complaints concerning specific behaviors of
party members would trigger a DIC investigation. Second, every
government and party bureaucracy was required to produce an end
of year work report. Every person within the organization was
then expected to give the leader of the organization a grade on
the report, of "excellent," "competent," "basically competent,"
or "not competent." Cadres who whose evaluation came up as
"excellent" received a bonus equivalent to an extra month and a
half's salary. Cadres who received an overall review of
"competent," received an extra month's salary. If, however, 30
percent or more of the respondents rated an official as
"basically competent" or "not competent," a DIC investigation
would automatically be triggered.


9. (C) Separately, while Ms. Zhou acknowledged that Professor
He was correct in his description about how a number of the DIC
investigations were launched, she disputed the notion that this
was any sort of democratic procedure, noting that He was not
telling the whole story. Aside from poor evaluations and
people's letters, many DIC investigations were launched based on
referrals from the Procuratorate, or simply because someone at a
higher level had an axe to grind.


10. (C) Moreover, not every case that came before the DIC was
investigated. When a case came to the attention of the DIC, its
Case Examination Office (CEO) (anjian shencha shi) would examine
the initial complaint to see whether it merited further
investigation. If the CEO decided the case warranted a closer
look, it would refer the case to the DIC secretary who would
consult with and get the approval to move forward from the party
secretary at the next level above the suspect. Once the

SIPDIS
decision was made to investigate, a team would quietly make a
preliminary investigation into bank accounts and other financial
records to uncover some sort of irregularity. Zhou said that
the DIC could uncover or manufacture some sort of dirt on any
Chinese official it wanted to.


11. (C) After some initial findings were dug up, the suspect
would be invited to dinner or breakfast at a hotel where he was
told he would stay the night. This was the so-called "Two

SHANGHAI 00000225 003.2 OF 004


Restrictions" or "Shuang Gui", where the person was asked to
report at a certain time and a certain place (Ref C). Once the
official--generally unwitting of any problem at this
point--showed up at the appointed time and place, he was
sequestered in a room, where he would be told he would be held
until the case was resolved. Zhou noted that since the
confinement of Chen Liangyu, many Shanghai officials joked that
if someone invited you to coffee or lunch, you were fine, but if
it was dinner or breakfast you were in serious trouble.
(Comment: It would appear that it is common practice for
officials to stay overnight at hotels for dinner or breakfast
meetings, or else the invitation would probably be a dead
giveaway of pending doom and a cue for the suspect to flee. End
comment.)


12. (C) The person would then be held incommunicado until the
DIC inspection team completed its work. DIC teams were given
great leeway in how to run their investigations and often left
no stone unturned in their efforts to find as much dirt on a
person as possible. During a house arrest in the hotel, the
suspect would be constantly criticized and interrogation
techniques would be employed to wear down resistance. The
suspect would be told that his friends, coworkers, and relatives
had already told the teams everything about the case and the
suspect would be encouraged to tell the team his or her side of
the story to "make things easier on yourself." The official
would be told he knew why they had been placed under "Shuang
Gui" and that they needed to write daily self criticisms. Once
the team completed its investigation, it would turn the evidence
over to the Procuratorate and the courts for sentencing and
punishment. (Note: The team could also decide to handle the
matter entirely within the party. End note.)


13. (C) The whole problem with the DIC investigation system was
that it was based on political decisions. Once a decision had
been made to investigate a cadre, guilt was usually a foregone
conclusion. The investigation itself was used to build up
evidence to support a decision that had already been made. Zhou
noted that since this system was not based on the rule of law,
but rather on decisions of unelected, unaccountable party
officials, it was a sham to say that it represented any sort of
Chinese democracy.


14. (C) Zhou cited the Chen Liangyu case to prove her point.
Despite having been under house arrest for over half a year, the
CDIC investigation team had still produced no hard evidence of
Chen's malfeasance. The money that Chen had supposedly
misappropriated had all been recovered, and Chen's case had
still not been turned over to prosecutors. Chen's biggest
crimes, Zhou opined, were having been affiliated with the wrong
political faction, ignoring central policy directives, and
making personally disparaging remarks about Hu Jintao. Zhou
said her contacts in Beijing had assessed that if Zeng Qinghong
had not "turned" in his allegiance from party elder Jiang Zemin
to Hu Jintao, Chen would not have fallen. However, when Zeng
made the switch, he abandoned Chen to the wolves.

-------------- ---
A New Ministry in the Works But What Will it Do?
-------------- ---


15. (C) With a massive anticorruption bureaucracy already in
place unable to stem the tide of bureaucratic malfeasance, it
was only a matter of time before the Chinese government decided
to add one more layer of bureaucracy to "fix" the problem.
During an April 6 meeting with officials from the Jiangsu
Academy of Social Sciences (JASS), President of the School of
Political Sciences Bian Min--and Ms. Zhou separately--confirmed
Xinhua reports that the State Council planned to set up a new
State Corruption Prevention Bureau (SCPB) in the near future,
with Bian noting that Beijing had already decided on how many
staff the Bureau would have.


16. (C) Ms. Zhou said she had heard from friends in Beijing
that the idea for the Bureau had actually come from the CPPCC.
Some of the CPPCC representatives had presented it to the
government as part of their "democratic oversight"
responsibility as a way to help combat the pervasive problem of
corruption. Zhou said that when the CPPCC presented its
suggestions to the Politburo, members had little political
choice but to wholeheartedly agree to its establishment or risk
looking as if they personally had something to hide. Exactly
when the Bureau would be established was unclear, but Ms. Zhou
believed it would be by year end.

SHANGHAI 00000225 004.2 OF 004




17. (C) During an April 17 conversation, Jiaotong University
Law Professor Zhou Wei said that, initially, there had been high
expectations and hope that the agency would act like Hong Kong's
Independent Commission Against Corruption. However, now, as
Professor Zhou understood it, the Bureau would be
organizationally under the Supervision Ministry, rendering it
ineffective at performing any independent investigations.
(Note: Professor Zhou's assessment of where the SCPB would fit
organizationally differed from our contacts in Nanjing who
expected the Bureau would be directly under the supervision of
the State Council. In late February and late March, Xinhua
reported that CDIC and MOS officials also said that the new
Bureau would fall under the State Council. End note.)


18. (C) What functions the SCPB would ultimately have, was even
less well understood. Professor He believed that the SCPB would
be solely a central government-run organization, funded by
Beijing, and doubted it would have provincial offices. He
believed it would serve a coordinating function, much like the
Nanjing Corruption Prevention Bureau and would directly
supervise top provincial leaders. From that perspective, NPS
Director of the Scientific Socialism Department Wu Shu said he
believed that the Bureau would have a great deal of overlap with
the CDIC and the Ministry of Supervision, but did not go into
detail. Wu thought that part of the Bureau's function would be
to draw lessons from foreign and Hong Kong experiences on
building a clean government and help devise policies to
strengthen punishments. JASS's Bian believed that the SCPB
would focus more on finding ways to prevent corruption rather
than overlapping much with the CDIC's and Ministry of
Supervision's investigative authority. Bian noted that
corruption was a serious problem and Beijing recognized it
needed to focus more on prevention than solely on punishment.


19. (C) Chief of the JASS Research Section Tian Boping added
that he thought the goal was worthy, but that it would be
difficult to carry out. He said that if the central government
had the will, it would carry out the "effective" establishment
of the Bureau. Whether that carried down to real implementation
at the local level, where corruption was most rampant, would be
a different story. Ms. Zhou had no insights on what the
function of the new Bureau would be, other than expecting it
would likely duplicate efforts already underway in the CDIC and
Procuratorate. She opined that corruption was a structural
problem involving lack of rule of law and that adding another
layer of bureaucracy would have little overall impact without an
overhaul of the political system.
JARRETT