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Shirley Yam

AS THE CHINESE Communist Party moves closer to an expected major shake-up late next year,  more corruption scandals can be expected.

The latest is the arrest of Shanghai's pension fund manager and the chairman of Shanghai Electric, one of the city's most important companies.

The director of the city's Labour and Social Security Bureau, Zhu Junyi, allegedly lent more than three billion yuan to a company called Fuxi Investment Holding to invest in highways.

Fuxi holds a stake in Shanghai Electric and Fuxi's chairman, Zhang Rongkun, is a non-executive director of the electrical equipment maker.

More officials are likely to be implicated.

Due to the timing of the investigation and the seniority of the people involved, many observers see this as another move by Beijing to tame the so-called 'Shanghai Gang'.

This is an informal collection of officials and other power brokers who exercise considerable clout nationally because of the city's financial and commercial importance.

They compare this to the 2003 scandal which landed Bank of China chief executive Liu Jiabao and Shanghai property developer Chau Ching-ngai behind bars.

The Shanghai elite have to some extent been on the defensive ever since. The decision to arrest the two men is widely believed to have been come in an understanding between President Hu Jintao and his predecessor Jiang Zemin.

The 2003 case led to investigations of charges that a large number of Shanghai officials, including some very senior ones and their relatives, took bribes. Though none were officially charged, the political influence of the Shanghai Gang was significantly reduced.

The desire on the part of wary Beijing officials to curb the influence of Shanghai also played a part in the moves beginning last year  to cool the city's property boom thereby reducing the clout of those who benefited from it.

Shanghai's influence at the national level also suffered a blow with the revelation that Vice-Premier Huang Ju, one of city's major supporters in the Politburo, suffered from cancer. Despite his recent public appearances, his chances of recovery are thought  to be low.

The shifting winds have forced some Shanghai power brokers to tack. It is an open secret in  Shanghai and Beijing that the city's party secretary, Chen Liangyu, now seeks to portray himself as a close ally of Mr Hu.

Not so long ago, he was Mr Jiang's protege, and was critical of the central government's macroeconomic policies that threatened the city's prosperity.

The budding Hu-Chen relationship was underscored when China Central Television carried a detailed report on the evening news of Mr Hu's visit to Shanghai that featured Mr Hu and Mr Chen jointly touring the city's factories and port facilities.

That same day, Xinhua  cited Mr Hu praising Shanghai's achievements in reform and modernisation. Such high-level plaudits were unprecedented.

In response, Shanghai officialdom responded with a valentine of its own.

On July 8, the ninth plenary session of the eighth Shanghai Municipal Chinese Communist Party Committee approved a resolution calling for 'more closely uniting around the party central committee with Comrade Hu Jintao as the general secretary'.

This slogan-like declaration of one's fealty is a common coda to important party meetings. However,  the word 'more' is not in the standard version. To many, this represented a signal that Shanghai was now no longer a real threat.

It would be naive to suggest that Shanghai and the central government are now joined at the hip. There is, however, no obvious need for state leaders to use another scandal to bring Shanghai in line.

There are other signs indicating that the current case is more locally oriented. For one thing, while the Shanghai administration was strictly barred from the handling and investigation of the 2003 scandal, its involvement in this  case remains deep.

It is too early to tell if the current scandal is a result of  friction among rival local  camps.

Nevertheless, how the case is handled  has significant implications on the political career of Mr Chen, who is widely expected to win promotion to Beijing.



Taming of the Shanghai Gang comes before the party's shake-up