Risk vs. Opportunity: Xi’s New Shanghai Chief to Target Entrenched Corruption Networks

Former Jiangsu Party secretary Li Qiang replaced Han Zheng as Shanghai chief on Oct. 29.

Until his recent elevation to the Politburo Standing Committee, Han spent his entire political career in Shanghai. He is also a member of Jiang Zemin’s faction and appeared to turn a blind eye to the Jiang clan’s corruption during his long stint in Shanghai’s senior leadership ranks.

Li was Xi Jinping’s secretary-general in Zhejiang Province and is one of Xi’s trusted officials.

Since Xi took office in 2012, nine of the 11 top posts in the Shanghai administration have been reshuffled twice. Eight of the new leading Shanghai officials were born in the 1960s, and one is born in the 70s.

Why it matters:

1. Shanghai, an important financial hub, is the base of operations for Jiang and his faction.

2. Jiang’s sons, Jiang Mianheng and Jiang Miankang, oversee the Jiang clan’s corrupt activity in Shanghai and still reside in the city.

Our take:

1. Han Zheng’s promotion takes him away from Shanghai and exposes the Jiang clan.

2. Li Qiang will escalate Xi’s anti-corruption drive in Shanghai.

  • The Jiang clan and the officials or businessmen associated with them will very likely get targeted.
  • Li drew up the battle lines during his opening address as Shanghai chief by declaring that he would “take the lead in resisting and opposing all passive and corrupt phenomenon.”

3. The Jiang faction’s business associates and officials have already been punished elsewhere.

  • Xi Jinping took office in late 2012. Several big foreign companies were subjected to anti-monopoly probes and had to pay huge fines starting in 2013.
  • For instance, chip maker Qualcomm was fined a record $975 million in 2015.
  • Many of the companies that were fined had entered China during the Jiang era (1997-2012) and developed their official networks then.
    For example, Qualcomm broke into China and introduced its CDMA wireless technology in the early 2000s in part owing to the company being able to get Jiang’s mentor on board as a consultant.
  • One of the first Chinese firms to work on joint ventures with Qualcomm was China Unicom, a Chinese telecommunications giant. A 2008 merger saw China Unicom come under Jiang Mianheng’s control. Jiang Mianheng is the elder son of Jiang Zemin.
  • Jiang faction officials were also not spared: In 2015, China Unicom chairman Chang Xiaobing was suddenly transferred to head China Telecom. After four months in his new job, he was suddenly arrested and sentenced to five and a half years in jail. Chang is a “white glove,” or money launder, of Jiang Mianheng.

4. Shanghai will bear the brunt of Xi’s efforts to clean up corruption in China’s financial sector.

  • Many of the short sellers during the 2015 China stock market crisis were private or overseas hedge funds based in Shanghai.
  • Xu Xiang, the Chinese billionaire (“China’s Carl Icahn”) who was prosecuted in January for manipulating stocks and insider trading during the 2015 financial crisis, is known to manage the assets of many high-ranking officials.

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