The power struggle behind China’s corruption crackdown

BEIJING/HONG KONG, (Reuters) – Liu Han seemed to thrive in the company of officials.

Even a birthday party in 2011 for Liu’s primary-school aged son drew a crowd of bureaucrats in Chengdu, the capital of China’s western Sichuan province where the flamboyant mining tycoon was based.

“There was a mayor of a nearby city with a population of three or four million,” recalls Australian political lobbyist John Halden who helped win approval for Liu’s mining investments in Western Australia and was invited to the October 15 celebration. “There were senior people from the provincial treasury and about seven or eight officials from the city of Chengdu.”

But Liu’s close ties with officialdom didn’t last. When Chinese President Xi Jinping was named President at the end of the annual parliamentary session in March last year, the 48-year-old Liu was detained and surrounded by a different class of public servants; corruption investigators and prison guards.

The billionaire head of the privately-held Sichuan Hanlong group of companies is the first high-profile casualty of a power struggle wrapped in a corruption crackdown that is convulsing the senior echelons of the ruling Communist Party.

A verdict is expected Friday after Liu’s sensational trial on charges of murder, gun-running, fraud, extortion, illegal gambling and a string of other offences. He has denied all the charges.

Liu’s most serious offense, however, could well be political: He was caught up on the wrong side of a titanic power play, multiple sources say, because of his business partnership with the son of former domestic security chief, Zhou Yongkang. In a campaign unprecedented in modern China, Xi is determined to bring down Zhou for making a behind-the-scenes grab for power, the sources say.




To get at Zhou, Xi last year began rolling up the strongman’s extensive network of patronage, assembled over more than four decades in the oil industry, Sichuan provincial politics and the internal security services.

More than 300 of Zhou’s relatives, political allies, business associates, underlings and staff, have been arrested, detained or questioned, according to people briefed on the investigation. Liu was one of them.

Investigators have targeted the giant, state-owned China National Petroleum Corporation – where Zhou was once general manager and Communist Party Secretary – and its subsidiaries.

First, they detained six senior executives from the oil giant late last year. Then, late last year, Xi launched a probe into Zhou himself and people around him. Several of Zhou’s men have been felled, including Jiang Jiemin, briefly the top regulator of state-owned enterprises, and former Vice Minister of Public Security Li Dongsheng.

Authorities seized assets worth at least 90 billion yuan ($14.5 billion) from Zhou’s family members and associates, two sources said. Liu’s assets were included in these seizures. Ahead of his trial, the official Xinhua news agency reported that authorities had last year “seized and frozen enormous amounts assets of Liu Han and the Hanlong group”.

Zhou is the most senior leader targeted in a corruption probe since the Communists took power in 1949. With the approval of China’s two previous leaders, Hu Jintao and Jiang Zemin, as well as other senior officials, sources close to the leadership say, Xi broke with an unwritten rule that incumbent and retired members of the Standing Committee were immune from corruption investigations.

The Communist Party’s Central Commission for Discipline Inspection, China’s top anti-corruption watchdog, and the Ministry of Public Security declined to comment on the investigation when reached by telephone. The office of the Communist Party spokes-man also declined to comment when reached by telephone. Although he retired in late 2012 from the elite Politburo Standing Committee, the apex of political power in China, the 71-year-old Zhou wanted to rule from behind the scenes and had become a threat to leadership stability, according to multiple sources with leadership ties. One of Xi’s influential patrons, former vice president Zeng Qinghong, was the catalyst for the investigation into Zhou, three sources with ties to the leadership said.

“Zeng proposed to central (authorities) that Zhou Yongkang be investigated for posing a political risk to the collective leadership,” one of the sources said. Neither Zhou nor his representatives were available for comment. No evidence has emerged that Zhou or his relatives have violated any Chinese laws or used Zhou’s influence to clinch deals.




As part of his vision for a rejuvenated China, Xi is preaching a return to the austerity of the Party’s early years. An attack on corruption is at the core of this campaign. Xi pledges to go after “tigers and flies” in rooting out wrongdoing. He warns that popular disillusionment with rampant official graft threatens the Party’s hold on power. While there is little risk for Xi and his supporters in taking down Liu, a similar move against someone as senior as Zhou Yongkang will take much more political courage.

“If the leaders are using the corruption crackdown just to bring down their political rivals, there will be grim consequences, as many officials in China are believed to have corruption problems,” says Zhao Guangbin, managing director of Shanghai and Toronto-based consulting firm, Gateway Inter-national Group.The government and state media have not made any official statement about Zhou or the case against him. An announcement is expected around the fourth plenum of the party’s elite 205-member Central Committee later this year, two sources said. Xi and other top leaders have yet to decide whether to put Zhou on public trial, according to multiple sources with leadership ties.

Latest in World News

Mario Draghi

EU leaders tell Britain to exit swiftly, markets steadier

LONDON/BRUSSELS, (Reuters) – European leaders told Britain yesterday to act quickly to resolve the political and economic confusion unleashed by its vote to leave the European Union last week, after the IMF said the uncertainty could put pressure on global economic growth.

default placeholder

Suspected Islamic State suicide bombers kill 36 at Istanbul airport

ISTANBUL, (Reuters) – Three suicide bombers opened fire then blew themselves up in Istanbul’s main international airport yesterday, killing 36 people and wounding close to 150 in what Turkey’s prime minister said appeared to have been an attack by Islamic State militants.

default placeholder

Libya wealth fund boss screamed, cursed at Goldman bankers -witness

LONDON, (Reuters) – The Libyan wealth fund’s former deputy chief screamed and cursed at Goldman Sachs bankers in a stormy meeting over derivatives trades made on the bank’s advice that ultimately turned out to be worthless, a witness told a court yesterday.

default placeholder

Toyota recalling 1.43 million hybrids worldwide for air bag issue

WASHINGTON, (Reuters) – Toyota Motor Corp said late yesterday it is recalling 1.43 million hybrid Prius and Lexus CT200h cars worldwide because of a possible airbag inflator defect.

George Osborne

Brexit vote, UK political confusion rattles world markets for second day

LONDON (Reuters) – Britain’s vote last Thursday to leave the European Union continued to reverberate through financial markets yesterday, with the pound falling to its lowest level in 31 years, despite government attempts to relieve some of the confusion about the political and economic outlook.

default placeholder

Turkey mends fences with Israel, Russia in foreign policy reset

ISTANBUL/MOSCOW/JERUSALEM (Reuters) – Turkey announced the restoration of diplomatic ties with Israel yesterday after a six-year rupture and expressed regret to Russia over the downing of a warplane, seeking to mend strained alliances and ease a sense of isolation on the world stage.

default placeholder

Kerry raises harassment of US diplomats in Moscow with Putin

WASHINGTON (Reuters) – Russian harassment and surveillance of US diplomats in Moscow has increased significantly and US Secretary of State John Kerry raised the issue recently with Russian President Vladimir Putin, the State Department said yesterday.

Boris Johnson

British EU vote unnerves world leaders and markets

LONDON,  (Reuters) – Britain plunged deeper into political crisis yesterday after its vote to exit the European Union last Thursday, leaving world officials and financial markets confused about how to handle the political and economic fallout.


About these comments

The comments section is intended to provide a forum for reasoned and reasonable debate on the newspaper's content and is an extension of the newspaper and what it has become well known for over its history: accuracy, balance and fairness. We reserve the right to edit or delete comments which contain attacks on other users, slander, coarse language and profanity, and gratuitous and incendiary references to race and ethnicity.

Stay updated! Follow Stabroek News on Facebook or Twitter.

Get the day's headlines from SN in your inbox every morning: