EAST CHINA--MORE POLITBURO RUMORS AND LEADERSHIP TIDBITS

S E C R E T SECTION 01 OF 03 SHANGHAI 000422

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SIPDIS

DEPT FOR EAP/CM, INR/B AND INR/EAP
STATE PASS USTR FOR STRATFORD, WINTER, MCCARTIN, ALTBACH, READE
TREAS FOR OASIA - DOHNER/CUSHMAN, WRIGHT
USDOC FOR ITA/MAC - A/DAS MELCHER, MCQUEEN
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E.O. 12958: DECL: X1 MANUAL REVIEW
TAGS: PGOV PINR EINV ECON CH
SUBJECT: EAST CHINA--MORE POLITBURO RUMORS AND LEADERSHIP TIDBITS

REF: A) SHANGHAI 379; B) SHANGHAI 225

CLASSIFIED BY: Simon Schuchat, Deputy Principal Officer, U.S.
Consulate , Shanghai .
REASON: 1.4 (b),(d)




1. (C) Summary: East China contacts reported that Vice
President Zeng Qinghong had submitted his resignation to the
Politburo Standing Committee (PBSC). Current speculation was
that not only would Zeng step down, but that all but two or
three of the current nine PBSC members would retire, possibly
including Premier Wen Jiabao. Despite possible personnel
changes, however, the Strategic Economic Dialogue (SED) process
would likely remain on track. Meanwhile, President Hu Jintao
was busy in the provinces, arranging the recent Party Secretary
reshuffles in Shanghai and Zhejiang and a pending transfer to
Beijing for Jiangsu Party Secretary Li Yuanchao. End summary.

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Zeng's Out, Wu's In?
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2. (S) During a June 25 meeting, Nanjing University Professor
Gu Su confirmed press reports that Vice President Zeng Qinghong
had, indeed, submitted his resignation (Ref A). He said that Hu
had told Zeng that he would not be allowed to violate the
so-called "seven up, eight down" rule "requiring" PBSC members
to retire if they turned 68 prior to a party congress. During a
June 26 meeting, Tongji University Professor Frank Peng assessed
that Vice Premier Wu Yi was a likely choice to fill Zeng's slot.
He noted that there were no "rules" when it came down to it,
and that if Hu really wanted to, he could find a way around the
age issue in Wu Yi's case. Gu, on the other hand, believed Wu
would likewise be forced out over the age issue, but that she
would continue to be in charge of the economy "for a while" from
behind the scenes.

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PBSC: Only Two to Stay, and One is not Wen?
--------------


3. (S) Peng said that it was possible that only two people
would be staying on the PBSC--Hu Jintao and legislative chief Wu
Bangguo. He had heard that Premier Wen Jiabao had recently
submitted his resignation. Some of the party elders had accused
Wen of being "weak" on foreign policy, especially regarding
Japan, foreign exchange issues, and RMB revaluation. (Comment:
Even if it is true that Wen submitted his resignation, it is not
clear if it has been accepted. Former Premier Zhu Rongji
likewise reportedly submitted his resignation several times to
the PBSC, only to have it rejected. End comment.) Peng said
that the most likely candidates to succeed Wen as Premier,
either this fall or in 2012 were Minister of Commerce Bo Xilai
and Beijing Mayor Wang Qishan.


4. (S) Gu noted that PBSC member and propaganda chief Li
Changchun was also in danger of losing his job despite his
relative youth. As a member of the so-called "Shanghai Gang"
headed by former president Jiang Zemin, Li was the target of
many within the party's the "anti-Jiang" faction. These people
were using Li's ties to organized crime in Henan and Liaoning
provinces to try and push him out. Gu said that Li has
submitted his resignation to the PBSC "almost every two months."


5. (C) During a July 6 discussion, Shanghai Municipal People's
Congress (SMPC) researcher Zhou Meiyan said that it was unclear
whether Hu would designate a successor at this Party Congress.
She said that some in Beijing were saying that Hu might follow
the Vietnam model of having more than one candidate and allowing
the Party Congress to decide on the next Party Secretary. Zhou
said that if more than one person eligible for two terms under
the "seven up, eight down" rule were "helicoptered" to the PBSC
this fall, it would be a clear indication that Hu was planning
to allow a vote to take place.


6. (C) Gu said that currently, everything was up in the air
regarding personnel decisions and would not be resolved until
the Party Congress. He did say, however, that the one thing
that was certain was that the Shanghai Faction would be gutted.
Gu added that Jiang's influence was "over."

SHANGHAI 00000422 002 OF 003



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Why Wu Bangguo?
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7. (C) Zhou said that Wu Bangguo's political continuance was
baffling to everyone she knew. Wu was definitely not tied into
Jiang's faction, despite having come up through the Shanghai
bureaucracy. Whereas Wen Jiabao appeared to be more of a
political liberal and Hu Jintao appeared to be more of a
political neutral, Wu Bangguo represented the conservative
element of the party in the current top leadership trifecta.
Wu's rollbacks and criticisms of local People's Congress
initiatives and comments such as his recent statement that Hong
Kong only had as much self-governance as Beijing allowed, showed
that Wu was much more conservative than Wen or Hu.


8. (C) Zhou and her colleagues had discussed this question
multiple times in the past and concluded that Wu had risen to
the top primarily because of two factors. First, Wu, along with
Hu Jintao, had been identified by Deng Xiaoping shortly after
Tiananmen as one of the core leaders of the party's Fourth
Generation. Second, Wu was the least threatening of all the
senior leaders to Hu's position. Wu had virtually no personal
network, lacked any real personal power, appeared to have no
living senior backers, and was the most willing to obey Hu's
line. Zhou added that most folks in the SMPC "hated" Wu. His
name could also be (and frequently was) homophonically written
to mean "mistaken help to the nation" or "no help to the nation."

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Leadership Constant on the SED
--------------


9. (C) During a June 25 discussion, Director of Jiangsu Academy
of Social Sciences Office of Research and Coordination Sun
Keqiang opined that even though the players might change as a
result of the 17th Party Congress, the Strategic Economic
Dialogue (SED) process would not. According to Gu, all
government positions would be announced by December, clearing up
confusion over who the SED interlocutors would be. Minister of
Commerce Bo Xilai would likely take over as the point of contact
for the SED. However, Wu Yi would still be "calling the shots"
for a time. Gu said that some of his contacts in Beijing were
saying Bo might take over as Executive Vice Premier from the
recently deceased Huang Ju. Bo, Gu assessed, was similar to
Jiangsu Party Secretary Li Yuanchao in his thinking and
open-mindedness. Bo was also a very knowledgeable official,
according to Gu.

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Li Yuanchao: The Teflon Candidate
--------------


10. (C) According to Gu, Jiangsu Party Secretary Li Yuanchao
had not been hurt by recent scandals, including pollution in
Lake Tai, China's third-largest freshwater lake and supplier of
drinking water to a large percentage of East China residents.
Gu said that Li had physically moved his office to Wuxi for a
week or two to show his concern over Lake Tai and environmental
protection. Li also invited scholars from Shanghai, Beijing,
and Nanjing to the region to advise him on how to resolve the
issue. Li's rapid handling of the situation would leave little
room for critics to undermine his chances at promotion. Gu
assessed that Li remained a top candidate to eventually replace
Hu Jintao as Party Secretary. Gu noted that Hu Jintao had a
definite plan for the Jiangsu leadership and that Li's pending
promotion to Beijing was part of it.

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Hu Behind Recent East China Personnel Moves
--------------


11. (C) Zhou said that Shanghai Party Secretary Xi Jinping
would definitely be getting a seat on the Poliburo at the Party
Congress. She noted that Xi had been transferred to Shanghai in
part due to his relations with Hu Jintao. Hu, Zhou said, owed
his position as General Party Secretary in large measure to
support from Xi's father, party elder Xi Zhongxun, who had
supported Hu early on in his career and recommended him for
advancement. Xi Jinping's promotion was partial payback for his

SHANGHAI 00000422 003 OF 003


father's support. Zhou added that Hu had also been responsible
for promoting Zhao Hongzhu as Zhejiang Party Secretary to
replace Xi. Zhao, Zhou said, was a member of the so-called
"Communist Youth League Faction" and was close to Hu.

-------------- ---
Chen's Son, Fake Passports, Bad Police, and DICs
-------------- ---


12. (C) Zhou noted that Chen Liangyu's son had fled the
country, traveling first to Australia and then to either Europe
or the United States. She noted that no one had been able to
figure out where he ultimately ended up. He had made his escape
utilizing one of a number of false passports that he held. It
was a common practice for the family members of Chinese leaders
to hold multiple passports under different names to facilitated
travel for just such a purpose.


13. (C) Zhou said that it was easy for leaders to get false
documents because the heads of the Public Security organs, which
issued the documents, were answerable to the local leadership.
Family members could either get documents with a completely
fictitious name, or at times they would use the name of another
local person to procure documents. The documents themselves
could not be identified as forged because they were officially
issued.


14. (C) Zhou noted that while the Public Security organs might
engage in illegal activities at times at the behest of local
leaders, they were still somewhat constrained, being subject to
both government and People's Congress oversight. Discipline
Inspection Commissions (DIC) on the other hand, were the party's
investigative arm and reported to virtually no one. Only if the
local party secretary was not corrupt was there a modicum of
oversight. However, given that clean party bosses were few and
far between, even this measure was often lacking. Zhou assessed
that these oversight organizations were some of the most corrupt
in China's bureaucracy with little separating them at times from
organized crime.


15. (C) She described a recent case in Hunan Province where a
municipal level DIC head had been found to be abusing the
"Double Restriction" (Shuang Gui) detention system (Note: Shuang
gui refers to the party's detention method of informing someone
to report at a given time to a given location, afterwards they
are put under house arrest. For more information on the "shuang
gui" system, see Ref B. End note.). The DIC head would put
wealthy individuals under double restrictions until they agreed
to pay ransom. He also provided participating local businesses
with a sign that they could paste on their storefront for a
regular fee that would protect them from any "unpleasantness"
that might otherwise arise. In one particularly egregious case,
the DIC head ordered the local high court to rule in favor of
one of his relatives in a law suit. When the judge failed to
comply, the DIC head placed him and another judge under double
restrictions and threatened to arrest a third unless he
overturned the verdict.

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Bio Comment
--------------


16. (C) According to the Consul General, who attended a June 23
event commemorating the Hopkins-Nanjing Center 20 year
anniversary with Li Yuanchao, Li came across as a self confident
official with a "nice style" who came across as "down to earth."
Li also spoke decent English. During the event, Li began
delivering his remarks in English, without any text, for the
first couple of minutes before switching to Chinese, noting that
it would not be appropriate for someone of his current status to
speak all in English. Li did not wear an earpiece during the
simultaneous interpretation portions of the event.
JARRETT