In China, Political Rivalries Taint Efforts to Uncover Shady Deals

An ongoing corruption investigation involving Beijing Communist Party officials that has already led to one suicide and a suspended death sentence is beginning to point toward graft within the highest echelons of the Chinese leadership.

Details of the scandal, whose webs stretched from the corridors of Communist power in the Chinese capital to the corporate boardrooms of capitalist Hong Kong, are slowly being sketched out in the Chinese press. Chinese newspapers say that to date, 45 officials and company executives have been implicated in the case, which involved bribery, embezzlement, and theft of government property collectively valued at $2.2 billion.

While previous prosecutions for economic crimes have largely been limited to low- and mid-ranking cadres, the scope of the current probe is arcing even higher.

Deng Xiaoping's transformation of the Chinese economy has created a half-reformed system that presents myriad opportunities for corruption: Party officials can use their control over government assets and access to state loans and raw materials to profiteer on the free market.

Chinese intellectuals say that senior party, military, and government officials, along with their children, form a "Communist aristocracy" that enjoys virtual immunity from the law. Western business leaders regularly rate China as one of the most corrupt nations in the world.

Widespread popular discontent with official profiteering helped trigger massive protests in China in 1989, and "the issue still has the potential to mobilize disgruntled citizens in cities throughout the country," says Ross Terrill, an associate at Harvard University's Fairbank Center for East Asian Research in Cambridge, Mass.

Leaving his stamp on history

Jiang Zemin, China's president and Communist Party chief, has described graft as a virus that threatens socialist rule, and has attempted to place his mark on history and on the party by stamping out the worst effects of Mr. Deng's reforms. An anticorruption campaign Mr. Jiang launched last year has also netted some of the party chief's political rivals.

"Jiang has been brilliant in conducting the anticorruption drive because he is eliminating political competition and gaining widespread popularity at the same time," says the son of a mid-ranking party secretary studying in the US.

Jiang's drive has also claimed its first victim from the previously untouchable "princeling faction," or elite offspring of the Communist leadership.

Zhou Beifang, the latest defendant to be tried in the scandal, was recently sentenced to death, with a two-year reprieve, for issuing bribes to two Beijing city officials, according to reports in the Hong Kong press. What is unusual about his conviction and the severity of the sentence is that he and his father had generations-old ties with the family of once-paramount leader Deng. Zhou's father fought under Deng during the Chinese civil war and later rose to become the head of the powerful Capital Iron & Steel Corp. in Beijing with Deng's support.

The younger Zhou, after being appointed the head of two Hong Kong-listed affiliates of the Chinese steel giant, in turn named Deng's son to the board of one of the firms. Zhou had been detained during a trip to Beijing in February 1995; his father resigned as head of the multinational steel conglomerate the following day.

Late last week, one day following the report of Zhou's trial, the official China Daily said that Capital Iron and its affiliates were being reorganized. The Beijing-based newspaper added that some of the firm's subsidiaries had been "running in the red," but did not link any losses with Zhou.

Spokeswomen at the two Hong Kong-listed firms said that management had been meeting to discuss the restructuring, but refused to comment on the sentencing.

The Chinese press said recently that Zhou had made illicit payments to an assistant of Chen Xitong, the hard-line party secretary of Beijing who was placed under house arrest last year for "serious mistakes." Mr. Chen was detained shortly after a protg, a vice mayor, shot himself following questioning by the party's chief investigator on charges of embezzling tens of millions of dollars from the state.

The story behind the story

The case is an example of not only Beijing's ongoing antigraft campaign, but also the intense jockeying for power that has accompanied the elderly Deng's exit from the political stage, analysts say.

Chen, widely considered a rival of Jiang Zemin's, has been stripped of his posts as party leader of Beijing and as a member of the country's ruling Politburo.

The chief investigator of Chen's wrongdoings, another Politburo member named Wei Jianxing, has since taken taken up Chen's crown as Communist secretary of the capital. Mr. Wei is an ally of Jiang's.

Wei was recently quoted in the official Liaowang magazine as saying that Chen's case had "destroyed a number of comrades in the party" and vowed to resolve it soon.

If Chen faces criminal charges in court, he would be the first fallen Politburo member to be tried in China in more than 20 years. The only precedent was the highly orchestrated trial of Mao Zedong's wife and her three radical cohorts, who were collectively branded the "Gang of Four."

Mao's widow often derided the court proceedings as political theater staged and directed by Mao's successor, Deng.

Mr. Terrill, who is also a well-known chronicler of Mao's rule, says that "Chen Xitong's purge and possible trial is a sign that the era of economic reforms has not eliminated high-level political struggle within the Chinese Communist Party."

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