MORE DETAILS ON BEIDAIHE MEETINGS

S E C R E T SECTION 01 OF 04 SHANGHAI 000549

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, WRIGHT
USDOC FOR ITA/MAC - A/DAS MELCHER, MCQUEEN
NSC FOR WILDER AND TONG

E.O. 12958: DECL: MR, X1
TAGS: PGOV PINR EINV ECON CH
SUBJECT: MORE DETAILS ON BEIDAIHE MEETINGS

REF: A) SHANGHAI 508; B) SHANGHAI 485; C) SHANGHAI 527

SHANGHAI 00000549 001.2 OF 004


CLASSIFIED BY: Simon Schuchat, Deputy Principal Officer, U.S.
Embassy, Beijing, Department of State.
REASON: 1.4 (b),(c),(d)




1. (S) Summary: According to a well-connected contact, informal
meetings have continued at Beidaihe since the close of the first
Work Conference on August 10. A second Work Conference to begin
finalizing the name list for the Politburo and the Politburo
Standing Committee (PBSC) would likely take place within the
next two weeks, if it was not already underway. The newest
version of the PBSC name list included incumbent members
President Hu Jintao, Premier Wen Jiabao, and Vice President Zeng
Qinghong, while all others would be forced to retire. The
current personnel discussions reflected tensions among several
different factions, including the Communist Youth League,
Shanghai, and bureaucratic (guanliao) factions. The highly
fluid situation in Beijing was due to Hu's inability or
unwillingness to exercise independent leadership too far in
advance of the Party Congress. End summary.

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Meetings Continue at Beidaihe
--------------


2. (S) During an August 27 discussion, Nanjing University
Professor Gu Su discussed rumors he had heard from his contacts
in Beijing concerning the ongoing leadership meetings at
Beidaihe (Note: See Ref A for an initial read out from Gu on the
Work Conference. End note.). Gu said that his contacts told
him that the initial Work Conference was held between August
2-10, but that less-formal meetings have been continuing during
the intervening time as time permitted in the various leaders'
schedules. Moreover, top leaders' secretaries were still
encamped at the seaside resort and continued to lay the
groundwork for personnel and policy negotiations that could
later be ratified by their respective bosses. Party elders had
also either recently held or would very soon be holding another
"Democratic Life Meeting" to discuss their own suggestions on
issues to be discussed at the Party Congress this fall.
Likewise, another Work Conference was either currently underway
or would convene within the next two weeks after the leadership
got feedback from the provinces on their personnel and policy
proposals. Gu noted that the 7th Plenum was currently scheduled
for sometime in September and that the mid-late October
timeframe for the Party Congress still appeared to be holding.
(Note: Official media announced on August 28 that the Party
Congress would commence on October 15. End note.)

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PBSC Name List Revisited, Progress Being Made
--------------


3. (S) Gu said that according to a friend of his who had
recently returned from the Beidaihe meetings--where the friend
had been a participant--the most recent version of the PBSC name
list had seven positions. Hu, Premier Wen Jiabao, and Vice
President Zeng Qinghong would remain on the PBSC, while all the
other current members would retire. Zeng would take over from
Wu Bangguo as Chairman of the National People's Congress (NPC).
Although Zeng was currently 68--one year older than Wu
Bangguo--Gu opined that the party would cite "work necessities"
as the rationale for allowing him to violate the so-called
"seven up, eight down rule" that had been devised to force Li
Ruihuan from the PBSC at the last Party Congress. According to
the rule, a person could either be promoted to or remain on the
PBSC if they were 67 or younger but--in order to "rejuvenate"
the leadership--anyone 68 or older at the time of the Party
Congress needed to retire. Gu said that party elder Jiang Zemin
had been insistent on having Zeng remain, wanting at least one
person on the PBSC to represent his interests. Jiang was happy
to have Wu Bangguo step down, since Wu was not particularly
close to Jiang.


4. (S) Hu protege and Liaoning Party Secretary Li Keqiang was
set to take over Zeng's old position on the PBSC and backfill
for Zeng as Vice President and head of the Central Party School,
as well as take oversight of the Organization Department. Hu
protege, General Office Head, and Politburo alternate member
Wang Gang would also join the PBSC, taking over the propaganda
portfolio from current PBSC member Li Changchun and the Central
Disciplinary Inspection Commission from PBSC member Wu

SHANGHAI 00000549 002.2 OF 004


Guanzheng. Politburo member and Guangdong Party Secretary Zhang
Dejiang was also set for promotion to the PBSC to take over for
Huang Ju as Executive Vice Premier. From this slot, Gu
speculated, Zhang might be positioned to take over from Wen as
Premier in 2012, although he also recognized that Zhang could
simply remain in place if Bo Xilai was named Premier in
2012--also a possibility. Gu said that Zhang had initially been
a Jiang protege, but had switched his allegiance fairly early on
after the last Party Congress to Hu. Rounding out the PBSC
namelist was NPC Executive Vice Chairman Wang Zhaoguo--a protege
of late Party Secretary Hu Yaobang--who would presumably
backfill for Jia Qinglin as head of the Chinese People's
Political Consultative Conference (Ref B).


5. (S) Jiangsu Party Secretary and Hu protege Li Yuanchao,
Shanghai Party Secretary Xi Jinping, Minister of Commerce Bo
Xilai, and Qinghai Party Secretary Zhao Leji were likely to be
elevated to the Politburo. Of these, the first three--Li, Xi,
and Bo--were also members of the so-called "princeling
faction"--children of former high-level cadres. Gu assessed
that these three also stood a good chance of promotion to the
PBSC in 2012. Gu also thought that United Front Work Department
Head Liu Yandong might replace Vice Premier Wu Yi--who was
slated to retire--as the female representative on the Politburo.
Gu predicted that Vice Foreign Minister Dai Bingguo would
assume Wu's SED and other trade and foreign economic relations
responsibilities, in tandem with Bo Xilai.

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Factional Divides and Overlaps
--------------


6. (C) Gu further expanded on his multi-faction personnel fight
theme, noting that there were at least three main factions vying
for key slots, including the Communist Youth League (CYL),the
bureaucratic (guanliao),and Shanghai factions. Of these, Gu
assessed that the Shanghai faction was playing a smaller and
smaller role, especially since the arrest of former Shanghai
Party Secretary, Politburo member, and Jiang loyalist Chen
Liangyu on corruption charges, and the death of Jiang ally Huang
Ju. The CYL faction was largely comprised of people who had
spent their careers inside China's party apparatus, whereas the
bureaucratic faction consisted of people who had mainly served
in government positions. Their differences stemmed largely from
their approach to problem solving, with the CYL faction more
focused on using ideology and the bureaucratic group focused on
using procedure to implement change. This divide was similar to
that which existed in early reform era, between Hu Yaobang and
Zhao Ziyang. Gu explained that there were also other factional
groupings; factional divides were not always clear-cut. People
in one group could also be categorized as members of another
group, complicating the personnel selection process. For
instance, the princeling faction cut across other factional
lines and included people from the Communist Youth League
faction, the bureaucratic faction, and the Shanghai faction.

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Causing Weak Things to Be Made Strong
--------------


7. (S) Gu assessed the current leadership situation as "more
unstable that it has been in years." He blamed this primarily
on Hu's failure to establish his independent leadership earlier
on in his term. Hu had continued to consult Jiang on many
issues even after Jiang's full retirement, perpetuating a
tradition of quasi-subservience that had enabled Jiang to retain
some influence. Jiang's influence, in other words was not
necessarily based on his strength, but rather on Hu's passivity,
relative weakness, and failure to make necessary changes earlier
on. As a result, the various factions all had a stronger voice
than they had had in the run-up to previous party congresses.


8. (S) This situation had begun to change with the arrest of
Chen. Hu had first sought Jiang's approval to sack Chen.
However, since his arrest, Hu had begun showing greater
political independence. For instance, Hu had sacked Foreign
Minister Li Zhaoxing, a protege of former NPC Chairman Li Peng
who was perceived as a Jiang holdover. Hu had also succeeded in
tracking down Chen Liangyu's son and removing him to China from
Australia (Note: According to several other sources, including
that reported in Ref C, the son was extradited from Malaysia.
An Australian diplomat in Shanghai with whom we spoke was
confident that Chen's son had not been extradited from
Australia. End note.) Chen's son, who had been good friends

SHANGHAI 00000549 003.2 OF 004


with Jiang's family, reportedly had information on the
corruption of his eldest son, Jiang Miankang. Along those
lines, Gu also noted that the late-vice premier Huang Ju's
personal secretary had been arrested and possessed a wealth of
information on Jiang Mianheng's financial misdeeds that he was
now readily sharing with investigators. Gu believed that if
Jiang tried to exercise undo influence after the Party Congress
Hu was prepared to use the information he was collecting to
force Jiang into a more docile position. Gu's friends in
Beijing had told Gu that Hu now regretted that he had waited so
long to begin establishing himself.


9. (C) Gu believed that Hu had gained sufficient ground to
overcome objections to his Harmonious Society ideological
formulation. Harmonious Society, Gu assessed, would still be
the dominant ideological theme coming out of the Party Congress
with the Scientific Development Concept as the subordinate theme.

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Hu's Perfect Foreign Policy Record
--------------


10. (C) Gu said that Hu enjoyed a near perfect record on
foreign policy. His Japan policies were seen as successful.
Hu's Taiwan policy was also widely seen as more effective than
Jiang's. Hu refused to say anything publicly about the
situation prior to the Taiwan elections in an effort to avoid
negatively influencing the outcome of the elections. Many
blamed Chen Shui-bian's victory in part on Jiang for his
strident anti-Chen rhetoric prior to the last election. Hu
relied on the United States to keep Chen under control, allowing
him to play the role of patient statesman. In general, Hu was
seen as more patient than Jiang and more adept at working with
the United States to encourage it to help maintain a stable
international situation.


11. (C) As an aside, Gu noted that many government officials
preferred working with Republican administrations. Although the
party was in theory more in sympathy with the Democratic Party,
Republicans had historically given more and better attention to
the U.S.-Sino relationship. Gu quoted Mao Zedong's statement
that he preferred foreign rightists to leftists. Republicans
had a better reputation for trustworthiness among Chinese
officials and were seen as better at keeping their promises.

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Wen's Corruption and the Fading Leftists
--------------


12. (S) Gu noted that Hu's family was apparently free from
rumors of corruption, making him relatively impervious to
retaliatory investigations. Premier Wen's family--particularly
his two children--on the other hand, was involved in many
questionable dealings. Gu noted that this familial
corruption--which Gu referred to as Wen's "long tail"--left Wen
more vulnerable to attack. Wen had recently been complaining
about criticism he had faced from party leftists that mingled
both criticism of his policies with criticism of his family.


13. (C) Although they still remained a voice within the party,
Gu noted that leftists were decreasing in influence. Gu said
there was still an "old-school" leftist faction--most of whom
were in their 80s or older--who advocated bringing the party
back to its policy glory days of the 1960s. However, Hu had
recently shut down this group's website titled "Red Flag and Mao
Zedong Thought." "Neo-leftists," too, were diminishing in
influence, thanks in part to people like Wu Bing, the Chief
Editor of "Du Shu" magazine. Wu was the niece of Wu Zuguang, a
famous playwright who was purged as a rightist in the 1950s for
criticizing Communism. Under Tsinghua academic Wang Hui's
editorship "Du Shu" had promoted "new-leftist" views, but more
recently its readership had dropped by more than half, and the
publisher had brought in Wu to try to "fix" the problems with
the publication.

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Comment: The Seats Change, But the Names Remain the Same
-------------- --------------


14. (C) Comment: We note that over the past several weeks,
several different accounts of the Beidaihe events, and
particularly the PBSC name list have emerged in the foreign
press as well from our own contacts. For instance, in Ref A, Gu
himself gave a somewhat different take on the PBSC name list.

SHANGHAI 00000549 004.2 OF 004


While tempting to chalk this up to people throwing out their own
wild guesses or to view these changing lists as proof of the
unreliability of different sources, we would argue against this
for two reasons: 1) it is in the interests of different factions
to float different name lists through different channels as
trial balloons to gauge the reaction of different
constituencies; and 2) the situation is constantly changing, so
that it is possible--indeed likely--that some contacts are
providing accurate information as of the time they received it.
Whether that information remains accurate week to week is a
different story. The set of commonly cited names, while still
greater than the number of places on the PBSC, is relatively
stable, however, and with the August 28 announcement that the
Party Congress will begin on October 15, it is possible that the
party is beginning to reach some measure of consensus. End
comment.
JARRETT