The Party: The Secret World of China's Communist Rulers (23 page)

Wen’s wife attracts attention because her role in the flashy diamonds business is so at odds with her husband’s carefully cultivated image as the clean-living humble people’s Premier. In an open political culture, the obvious conflicts of interest between his position and the wealth she has generated in a tightly regulated business would be legitimate grist for the mill of public debate. Under the watchful eye of the propaganda department, however, Ms Zhang’s business dealings disappear into a black hole. Wen himself takes care never to appear in public with her and the media in China are not allowed to report on her dealings. ‘This conflicts with the kind of open atmosphere and image that the Chinese government is advocating, and something that is very much accepted in the west, to involve one’s spouse in public occasions,’ said Jin Zhong, the editor of
Kaifang
(
Open
), a Hong Kong political magazine. ‘Even though Jiang Zemin’s wife is elderly, he still takes her with him everywhere, as did Zhu Rongji, Li Peng and now Hu Jintao. Why not Wen? What reason is there for his wife not to show up? No Chinese would dare to touch upon this.’

The blackout imposed on information about Ms Zhang was replicated to suppress stories about corruption charges against a company once headed by Hu Haifeng, Hu Jintao’s son. The case was especially embarrassing for Hu, as he had until then won praise for keeping his family under control, unlike his predecessor, Jiang Zemin. The Chinese internet police gave suppression of the Hu Haifeng case the highest priority after it was first reported in Namibia, southern Africa, in July 2009. In a virtuosic display of their censorship capacities, the authorities were able to block stories about the case from within internet sites. So while the websites of the
New York Times
and the
Financial Times
were not blocked in China, the specific stories within them about Mr Hu’s case were. Equally, the subscription-only, password-protected Factiva news service operated normally inside China, but was disabled the moment users tried to call up stories about the Namibia case.

If they are careful not to flaunt their power and wealth at home, and in the cases of Ms Zhang and Mr Hu, keep their business activities out of the media, top leaders and their families are just about untouchable. ‘If the emperor does not want investigators to pursue corruption cases, then that’s it,’ said Wang Minggao. ‘If they run into the relatives of the emperor, they will be running into his core interests. Basically, they would be trying to exercise individual power against a whole class of people.’ The only thing that can tip the balance is top-level politics.

In the mid-nineties, Jiang Zemin’s removal of the Beijing mayor, Chen Xitong, on corruption charges symbolized his ascent to genuine power in the capital. Initially a weak leader in thrall to the elders who appointed him, Jiang gradually and deftly built his own power base, establishing loyalists from Shanghai at the top of the central government. The ‘Shanghai gang’ ruled the roost in Beijing for the best part of a decade, showering their home town with policy privileges and incurring deep resentment elsewhere in China. By 2002 and 2003, however, the faction’s power had peaked and had begun its decline, leaving the city and its leaders vulnerable as never before.

Shanghai had been fêted in colonial times as the Pearl of the Orient, a mercantilist and mercenary trading hub where it was ‘hard to know where the government ended and gangsterism began’. When Mao’s sandal-clad army marched into the city in 1949, they cast a cold eye on the freewheeling entrepot. Branding Shanghai the ‘whore of imperialism’, the communists submitted the city to a lengthy punishment, closing private businesses and locking up, or banishing, entrepreneurs, gangsters and foreigners alike. By the mid-sixties, history had turned full circle. Shanghai, once a gangsters’ paradise, had become the stronghold of the Party’s ultra-radicals. The spell that these two contradictory political currents cast over the city was not broken until 1989. The Shanghai that these days dazzles foreigners and local out-of-town visitors alike ironically owes its resurgence to the military suppression of the demonstrations in Beijing and other cities across the country that year.

Mao and his third wife, Jiang Qing, had used a clutch of radicals from Shanghai to launch the Cultural Revolution in 1966, their putsch against their chairman’s party rivals in Beijing. The ‘Gang of Four’, as Jiang Qing and her three cronies from the city came to be known, radicalized the economy and the arts. When Mao died, they tried to extend their power over the entire central government. Even after the Gang of Four were outmanoeuvred and arrested in Beijing in October 1976, the Shanghai party committee tried to fight on, mobilizing local militia groups to stage an armed insurrection against the incoming regime in Beijing. The city’s bosses backed down only when Beijing prepared a military counter-action, and Shanghai’s own residents, tired of their ultra-leftist leaders, took to the streets to support the new central government.

A newly chastened Shanghai was retooled by the Party into a bastion of state industry and forced to remit any profits generated by its enterprises to the central government in Beijing, much as had happened in the fifties, leaving nothing for reinvestment at home. In 1983 alone, Shanghai remitted more to the central government in taxes than it had received in investment from Beijing in the entire previous thirty-three years. Shanghai stagnated under Beijing’s thumb for more than four decades, until the early nineties, when politics intervened again, this time in its favour.

Deng Xiaoping, searching for a way to revive the national economy and fend off his left-wing critics in the wake of the Tiananmen massacre, produced the city as his trump card when he returned to the political stage on his 1992 southern tour. Deng lamented that his big mistake in the late seventies had been not to include Shanghai in the first batch of areas allowed to develop the market economy. More than a decade after Deng’s policies had been pioneered in southern China and elsewhere, Shanghai was finally let off the leash.

Shanghai’s leaders inherited a city in the early nineties with a great commercial history that had been emptied of commerce. They wasted little time in getting back into the game. In the decade from 1992, the city roared back to life, spurred by decades of pent-up demand. The visible fruits of this growth–the city’s gleaming skyscrapers, grand public buildings, sweeping flyovers and bustling metropolitan vigour–are a stunning advertisement for Shanghai’s, and China’s, revival. Shanghai’s own turnaround was symbolized by a single image, the spectacular and much-photographed Manhattan-like skyline of the Pudong financial district, an area which only a few years before had been a small, scrappy village.

Streams of foreign visitors have been dazzled by the view of Pudong, usually while clinking glasses on the terraces of the upmarket eateries housed in the colonial-era buildings that line the riverfront strip opposite, known as the Bund. The image this view conveyed–that Shanghai had returned to its entrepreneurial heyday–was far from reality. Unlike southern China and the Yangtze delta region, where Deng’s policies had bred a risk-taking, private economy, Shanghai was developed as a socialist showcase. Few visitors admiring the skyscrapers realized that most of them had been built by city government companies. Far from being the free-wheeling market place that many visitors believed, Shanghai represented the Party’s ideal, a kind of Singapore-on-steroids, a combination of commercial prosperity and state control.

The Shanghai mayor at the turn of the century, Xu Kuangdi, exemplified the city’s bustling political correctness. When he greeted groups of visitors to his office, he would grip each one’s hand and, in a single movement, shake it, while abruptly pulling the bewildered guest towards a waiting seat, before moving on to the next person. This was a man in a hurry, but not in the way that many assumed. One of the most liberal figures in the city government, Xu was unperturbed at the lack of local entrepreneurs. In the short term, he saw it as a virtue. ‘I think parental guidance is very important, especially during adolescence,’ he told me in 2001, striking the kind of unconsciously patronizing tone that only an all-powerful bureaucrat can muster. ‘The government certainly cannot lose its control on the state-owned sector; we are not for the shock therapy that they had in Russia. Look at Japan. When its economy was good, the government was playing a strong role. The same applies to Taiwan and South Korea. Later on, when they introduced free-market principles, they were not so effective.’ Xu expected Shanghai’s private sector to account for about 20 per cent of economic output by 2010, up from a minuscule 1 per cent in 1992.

Chen Liangyu made a similar boast later when defending the city against attacks from rivals who accused Shanghai of being too capitalist. ‘If I am not mistaken, our country’s private enterprises produce over 40 per cent of GDP nationally. Here in Shanghai, state enterprises produce nearly 80 per cent of GDP. If you want to discuss who adheres most to socialism, couldn’t it be said to be Shanghai?’ Chen said, according to a collection of his quotes circulated internally after his downfall. ‘Shanghai has built a model for our country’s socialist market economy. Shanghai has not practised capitalism. For Shanghai to wear that hat on its head would be unsuitable. It wouldn’t fit.’

The evidence suggests that Shanghai’s strong-state policy worked to plan in the fifteen years after the city’s opening. In a remarkable research finding, Yasheng Huang, an MIT economist, established that Shanghai had the lowest number of private businesses relative to the city’s size and its number of households in 2004, bar two other places in China. Only Beijing and Tibet, where government and the military are, respectively, the main businesses, had lower shares of private commerce. The result was that most of the money generated in Shanghai went to the government itself, to pay for infrastructure, its own pet business projects, and, of course, to be siphoned off in corrupt payments. ‘Shanghai is rich,’ said Huang, ‘but the Shanghainese are not.’

Shanghai had something else going for it from the late nineties onwards–heavy political clout in Beijing, through Jiang Zemin and his allies, who formed the largest, most powerful and most coherent faction in the Politburo. The city’s governing philosophy had gained national influence as well, stressing the importance of a strong, wealthy state on permanent stand-by as a counterbalance to the fast-growing private sector. Shanghai’s success as a bastion of state power, combined with its political muscle in the capital, gave it the status to become a test-bed for key reforms, in private housing, capital markets, state enterprises and social security.

The clout of the ‘Shanghai Gang’ in Beijing paradoxically heightened political restrictions in the coastal city. The central government did not want the rest of the country scanning the city’s press for clues about what was happening in the capital. In contrast to Beijing, where there are multiple competing government agencies and political agendas, Shanghai had a single, all-powerful and ever-present city government and a unified, tightly controlled propaganda department. Shanghai had been a big winner from the 1989 turmoil and was always keen to show it had taken the lessons of Tiananmen to heart, becoming just the kind of well-behaved model that Beijing wanted.

Shanghai was careful to write itself some political insurance along the way. Many provinces and cities in China have rules preventing officials from serving in senior posts in their home regions, a device to curtail the entrenchment of local fiefdoms powerful enough to ignore Beijing. Shanghai deliberately flouted this trend, ensuring that the prize jobs in the city were reserved for loyal, hometown cadres. The effect was akin to the advantage gained in intelligence gathering when you are able to glide, silently and unseen, through a targeted town in a car with tinted windows. Shanghai could see out and survey political developments beyond the city, but the rest of China could not see in.

The Shanghainese have always been a clannish bunch, happiest speaking their own dialect and looking outwards to the rest of the world rather than inwards to their fellow Chinese. From their perspective, the city’s revival had simply returned them to a position of power and prominence that their superior intelligence and business acumen merited. The city galloped ahead of the rest of the country during this period. The difference in per capita GDP between Shanghai and poorer inland areas, like Guizhou, nearly doubled in the decade from 1990. But where Shanghai celebrated hard-won success, much of the rest of China resented what they saw as the fruits of political privilege. A staple, sneering joke for people stuck in queues in China around this time summed up the sentiment. ‘Let the comrades from Shanghai board first!’ people jeered. The ill-feeling meant that when the tide began to turn in Beijing, Shanghai was suddenly vulnerable. For Hu Jintao, taking on Shanghai had multiple benefits. It would strengthen his leader ship and make an emphatic statement about his credentials on anti-corruption and economic management. Given the city’s snooty reputation, slapping down Shanghai would be wildly popular in the rest of the country as well.

When Jiang Zemin was appointed party secretary in May 1989, weeks before the tanks rolled into Beijing, he had to be smuggled into the capital to take up his position. A rattled Jiang was picked up at the airport in a VW Santana, China’s everyman car, instead of the Red Flag limousine then standard for top leaders. He was told to change into worker’s clothes for the ride into town to meet Deng, lest any of the angry demonstrators still filling the streets should spot him.

By comparison, Jiang’s handover of power to Hu Jintao at the 2002 congress, held at around the same time as Xu Haiming received his first eviction notice in Shanghai, was a milestone event in the history of the Party. It was not just the fact that Jiang was replaced by Hu as general secretary, but that he agreed to step down without a public fuss. Hu’s displacement of Jiang was not only the first peaceful handover of power in China since the 1949 revolution, which was notable in itself, but the first in any major communist country at all. In addition, the transition from Jiang to Hu was carried out according to an evolving set of rules in the Party, setting retirement ages for top leaders and ministers, and establishing a new unofficial limit of two five-year terms for the party secretary and premier.