EAST CHINA CONTACTS ON RECENT LEADERSHIP DEVELOPMENTS

S E C R E T SECTION 01 OF 03 SHANGHAI 000280

SIPDIS

SIPDIS

DEPT FOR EAP/CM, INR/B AND INR/EAP
STATE PASS USTR FOR STRATFORD, WINTER, MCCARTIN, ALTBACH, READE
TREAS FOR OASIA - DOHNER/HAARSAGER/CUSHMAN
TREAS FOR AMB. HOLMER, WRIGHT,TSMITH
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 RECENT LEADERSHIP DEVELOPMENTS

REF: A) SHANGHAI 213; B) SHANGHAI 163; C) BEIJING 2965; D) BEIJING 2861; E) BEIJING 2857; F) BEIJING 2711

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CLASSIFIED BY: Mary Tarnowka, P/E Section Chief,
Political/Economic Section, US Department of State.
REASON: 1.4 (b),(c),(d)




1. (C) Summary. Several East China contacts commented on
recent leadership developments at both the national and local
level. Despite media rumors that Executive Vice Premier Huang
Ju had died, one well-connected contact assured us that Huang
was still alive although his health was failing. Local contacts
viewed the recent appointments of the new Foreign Minister and
Minister of Science and Technology as fairly routine affairs,
given that their predecessors had reached the mandatory
retirement age of 65, but also as demonstration of President Hu
Jintao's intent to consolidate power gradually and send a
message about his priorities. Our contacts also relayed rumors
that the Politburo Standing Committee would shrink from nine
members to seven, although one had heard that it would, in fact,
expand to eleven members. Closer to home, a contact with
second-hand access said that Hu had been instrumental in Xi
Jinping's promotion to Shanghai Party Secretary. Meanwhile,
rumors abounded that Shanghai Mayor Han Zheng would soon be
removed. End summary.

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Huang Ju: The Reports of My Death Have Been Greatly Exaggerated
-------------- --------------


2. (S) On May 10, Director of Ford Service Parts Purchasing
Randy Creel told Pol/Econ Section Chief that he contacted his
former assistant at Ford, who also happened to be Huang Ju's
niece, to ask if the news reports about Huang's demise were
true. She informed him that Huang was still alive, although his
situation was serious. Huang was in the hospital and her
parents had gone to Beijing to be with him during this difficult
time. During a May 10 discussion with Poloff, Tongji University
Professor Frank Peng also denied rumors that Huang had passed
away.

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Yang Jiechi and his friends in High Places
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3. (C) Peng also commented that the appointment of new Foreign
Minister Yang Jiechi--otherwise known as "Tiger Yang" for his
aggressive negotiating style--was designed to be a signal of the
high importance the Chinese government placed on U.S.-Sino
relations. Yang had served for many years as the Ambassador to
the United States before moving to Beijing as Vice Foreign
Minister. His promotion to minister had been supported by State
Councilor Tang Jiaxuan who held Yang in high regard. Peng did
not think the timing of Yang's promotion was odd, noting that
the previous Minister, Li Zhaoxing, had recently reached the
mandatory retirement age of 65. Peng based his assessment on
Yang's promotion on conversations he had with Yang's brother,
Shanghai Institute for International Studies Vice President and
Senior Fellow Yang Jiemian.

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Wan Gang: A Lone Voice in the Party Forest
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4. (C) Peng also relayed his assessment of recently appointed
Minister of Science and Technology (MOST) Wan Gang. Peng has
known Wan for several years through their association at Tongji
University where Wan until transferred served as President.
Peng believed Hu had selected Wan--the only non-party member
minister-to portend his intent to undertake substantive
political reforms. As such, Peng assessed that Wan would have
greater support from Hu Jintao and the Politburo than other MOST
Ministers had enjoyed. Peng believed that Wan's outsider status
might actually strengthen his position vis a vis other
ministries such as the National Development Reform Commission.
As a symbol of political change, Hu could not afford for Wan to
fail. Peng noted that the Politburo had recently been stressing
the primary importance of science and technology development to
China's overall development strategy--another indication that
the new MOST Minister would have more influence than his
predecessors.


5. (C) Wan had told Peng that during the Spring Festival in

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2006, because of his expertise in the automotive sector, he had
been called on to personally brief the entire Politburo Standing
Committee (PBSC) on science and technology development. Wan
believed that this briefing had caught the attention of Hu
Jintao and others on the PBSC and that was why he had been
selected for his current position. Wan was not closely tied to
any particular leader or faction, although he had been
personally nominated by President Hu. Peng noted that as with
the Foreign Minister, the timing of Wan's promotion was not out
of the ordinary, given that his predecessor had also recently
reached the mandatory retirement age. Another local observer of
political developments, Weyerhauser China General Manager Zhang
Renren had a somewhat different take in May 9 conversations with
the Consul General and Pol/Econ Chief. He thought the
ministerial changes reflected Hu Jintao's desire to consolidate
power gradually as opportunities were presented and to portend
his priorities -- the importance of the U.S.-China relationship;
science and innovation; and a bit more movement on political
reforms.

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Assimilating Seven of Nine
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6. (S) During an April 26 conversation with Pol/Econ Chief, The
Carlyle Group Chief China Representative Luo Yi also reported
the latest scuttlebutt on top-level personnel changes that he
had heard from a close friend of Hu Jintao's son, Hu Haifeng.
According to Luo, his source said that the current plan was to
reduce the PBSC from nine back to its pre-16th Party Congress
level of seven. Five of the current PBSC members would be
leaving, including: Chinese People's Political Consultative
Conference (CPPCC) Chairman Jia Qinglin, Executive Vice Premier
Huang Ju, Central Discipline Inspection Commission Chairman Wu
Guanzheng, Luo Gan, and either Vice President Zeng Qinghong or
propaganda czar Li Changchun.


7. (S) Luo argued that if Hu was able to force Zeng out, it
would allow Hu to solidify his powerbase, giving him four of the
seven votes on the PBSC. Luo said that if Zeng were forced out,
it be under the "Seven Up, Eight Down Rule" that had been
implemented to oust former CPPCC Chairman and PBSC member Li
Ruihuan. (Comment: The "rule" was that if a person was 67 at
the time of the Congress they could remain on the PBSC, while if
they were 68, they needed to step aside to make way for younger
leaders. The "rule" had been created by former President Jiang
Zemin to oust his rival, Li Ruihuan. Prior to the 16th Party
Congress, the "standard" retirement age had been 70. End
comment.)


8. (S) Luo had heard from his contact that people slated for
promotion to the PBSC were United Front Work Department Head Liu
Yandong, Liaoning Party Secretary Li Keqiang, and National
People's Congress Executive Vice Chairman Wang Zhaoguo. Li was
to be designated as Hu's successor. At age 51, Li Keqiang held
an age advantage over Jiangsu Party Secretary Li Yuanchao (age
57),who had also been under consideration to take over as Hu's
successor. Wang, who served in the Communist Youth League for
many years and was formerly Hu Jintao's and Premier Wen Jiabao's
boss in the 1980s, had fallen from grace in the aftermath of the
1989 Tiananmen Massacre because of his close ties to former
Party Secretaries Hu Yaobang and Zhao Ziyang.


9. (C) Peng had also heard rumors that the PBSC would be
reduced from nine to seven. He believed that Jia, Huang, and
Luo were definitely retiring. He said Zeng's prospects,
however, were still up in the air. Peng opined that Zeng would
not be happy with taking up Jia's slot in the CPPCC, noting that
it was not a position of any real power. (Note: Peng himself
serves on the Shanghai Municipal CPPCC. End note.) Wang
Zhaoguo had been a contender for a PBSC slot; however, Peng
believed that recently surfacing rumors of Wang's philandering
might damage his chances of promotion. Peng corroborated Luo's
statement that Wang had been both Hu's and Wen's boss during the
late 1980s. Peng did not believe Liu Yandong would make it to
the PBSC, but would likely have a seat on the Politburo. Peng's
odds-on favorites for PBSC promotion were Li Keqiang and Li
Yuanchao.


10. (C) Zhang, however, had heard rumors that the PBSC was not
shrinking, but rather expanding and would increase to 11 people.
Zeng, Zhang said, was definitely going to stay on, according to
the rumors he had heard. He could not recall who else was

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slated to be in the expanded PBSC.

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Xi Jinping Tight with Hu
--------------


11. (S) During an April 17 meeting, Shanghai People's Congress
researcher Zhou Meiyan said that President Hu Jintao had called
the shots on the transfer of Xi Jinping from Zhejiang to be the
Shanghai Party Secretary. Zhou had heard this from
Beijing-based democracy advocate and long-time Embassy contact
Li Fan. Zhou explained that Li was a princeling whose father
was Li Qinghua, the former Ambassador to East Germany and India
and later the head of CCTV. Zhou said that Li Fan was friends
with Xi and had gained the information from his first-hand
dealings with Xi. Zhou said that according to Li, Xi Jinping's
father, Xi Zhongxun, had been instrumental in elevating Hu
Jintao to the PBSC and that Hu was now returning the favor to
the Xi family. Zhou believed it was certain that Xi was slated
for a Politburo slot and would likely advance to the PBSC in

2012.


12. (S) Zhou said that Li also informed her of a name list
maintained by the Central Organization Department for the
families of top Chinese leaders. Each family was allowed to
have one of its children placed on the list for eventual
promotion to leading roles within the party. According to Li,
Xi's brother-in-law (the husband of Xi's elder sister) was also
a princeling and had been on the list as well. However, with
Xi's promotion, his brother-in-law was now barred from further
promotion. (Note: Zhou was unable to remember the name of Xi's
brother-in-law. End note.)

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A New Life for Han Zheng?
--------------


13. (C) Zhou said that the scuttlebutt among Shanghai officials
was that Han Zheng was slated to be transferred out of Shanghai.
Although it was unclear when, Zhou speculated that it would
happen prior to the 17th Party Congress this fall. Zhou had not
heard who might replace him, although other Shanghai contacts
previously reported that it might be Anhui Party Secretary Guo
Jinlong (Ref B).


14. (C) Carlyle's Luo Yi also said Han was definitely leaving.
He speculated that Xi would not have agreed to take the job
without an agreement to force Han out. Luo did not think Han
would be removed on corruption charges, but rather thought that
Han might just be moved to a "dark hole" somewhere in the
central government--perhaps as Party historian, Luo
joked--retaining his current rank. Luo thought that Han would
definitely be replaced by an outsider since Xi would not trust
anyone within the current Shanghai government. Weyerhauser's
Zhang said that although he had not heard any recent rumors of
Han's imminent demise, he expected him to be gone by this
autumn. Many of the Shanghai bureau-level directors he knew had
told him that Han had seemed less happy and less engaged in
recent weeks.


15. (C) During a May 7 meeting with the Consul General, South
Korean Consul General Yang Kim said there was an ongoing
corruption investigation--separate from the pension fund
scandal--that might implicate Han and hurt his future prospects.
Kim's grandfather, something of a national hero, was a Korean
nationalist living in Shanghai who had advocated for Korea's
independence from the Japanese during the 1940s. South Koreans
visiting Shanghai frequently paid their respects at his
grandfather's former residence and often gave donations for the
upkeep of the home. Based on the number of visitors, and a
guestimate of USD 100 per person for a typical donation, Kim
speculated that those donations totaled more than USD 8 million
annually and went into a black hole in the Shanghai government
budget. On a smaller scale, visitors to Shanghai's Lu Xun Park
were also required to pay a 15 RMB fee if they wished to visit a
small section of the park that featured a monument to a famous
historical South Korean figure. Kim estimated there were about
200,000 such South Korean visitors annually. Visitors were
given a book mark but no receipt for their funds. The South
Korean Consulate had offered on several occasions to take over
the management of both sites, but the Shanghai government had
declined.
JARRETT