China Briefing

Do graft-busters have a new tiger in their sights?

The downfall of China Resources chief Song Lin has drawn attention to the 'Shanxi gang' of officials and mine owners who built fortunes on coal

PUBLISHED : Monday, 21 April, 2014, 3:21am
UPDATED : Monday, 29 February, 2016, 12:18pm

The dramatic developments that led to the sacking and detention last week of China Resources chairman Song Lin on corruption allegations have become the talk of the town in Hong Kong and Beijing.

And this is not just because 51-year-old Song was once considered a political rising star at the helm of one of China's largest conglomerates, which controls 2,400 firms, including five Hong Kong-listed companies, and employs half a million people.

It is believed that the authorities are set to press formal charges of corruption against Zhou Yongkang, a former member of the Communist Party's Politburo Standing Committee and public security tsar. Song's downfall now further heightens speculation - and expectations - that the leadership is closing in on one or more other high-level officials in President Xi Jinping's anti-corruption campaign against both high-ranking and lowly officials - his so-called tigers and flies.

Mine bosses and corrupt officials used their wealth to lobby and buy protection

In a sharply worded commentary, the website of the party-controlled Guangming Daily raised an obvious but important question: which government leader was responsible for holding up the investigation of Song for nearly a year since allegations of economic irregularities started to surface nearly two years ago?

Indeed, the accusations of irregularities emerged soon after China Resources allegedly overpaid for mining assets in Shanxi province by several billion yuan in February 2010. Investigative reports by some enterprising mainland journalists showed that most of the mining assets were idle. Moreover, China Resources quickly paid cash for the mines, even though some of them did not have official mining permits.

Since last June, at least three mainland journalists, including Wang Wenzhi, a senior reporter at an official newspaper controlled by Xinhua, have suggested in Weibo posts that anti-graft investigators look into the allegations, and specifically the dealings of Song, who they said pushed through the deal.

Song immediately denied the allegations in an official statement from China Resources and threatened to sue those who spread rumours and innuendo about himself or the company.

Song and China Resources launched a public relations drive and sought the help of certain officials to lobby mainland media not to pursue the case. China Resources allegedly started to approach key media with promises of multimillion-yuan advertising deals.

It now transpires that mainland authorities had indeed ordered an inquiry into the allegations as soon as they were made public last year, but were held up by "a high-ranking official".

Meanwhile, things took a dramatic turn on Tuesday when Wang posted another Weibo message alleging that Song had kept a mistress in Hong Kong - Helen Yang Lijuan, an investment banker at the local office of Swiss bank UBS - who was accused of laundering money for Song and accumulating a personal fortune of more than 1 billion yuan.

The following day, Song responded with a personal statement on the official site of China Resources but, unlike the last time, the company itself did not issue any statement.

On Thursday evening, the mainland's anti-graft investigators issued a one-line statement saying Song was under investigation for serious violations of party discipline and law - a standard term for corruption. This was followed promptly with Saturday's official announcement that he had been sacked.

In hindsight, last week's dramatic developments showed that anti-graft investigators already had enough evidence against Song, and Wang's latest Weibo message became the trigger.

Now, an intense guessing game has started that Song's detention will implicate his protector at the highest level of the government and the party - another tiger. It is an open secret that Song, who harboured ambitions of climbing further up the ladder, maintained close ties with current and former leaders.

Until now, some Hong Kong media have pointed fingers at another Politburo Standing Committee member who retired in 2012. Song allegedly helped one of his sons push through the mine acquisitions.

But the speculation in the corridors of power in Beijing indicated that Song had more than one protector in the leadership.

Some have suggested that Song's detention is part of a wider campaign against the so-called Shanxi gang, officials who worked their way up the ranks in the coal-rich province or trace their ancestry to there.

This follows the arrest of several dozen officials who worked in the petroleum industry or in Sichuan - the industry and province where Zhou established his power base.

A number of senior officials were arrested in Shanxi in the past year, including Jin Daoming , a former deputy provincial party chief and deputy chairman of the provincial people's congress, for rampant corruption and colluding with wealthy coal barons to amass vast personal fortunes.

The most recent casualty was Shen Weichen, a former deputy national propaganda chief and party secretary of Taiyuan, the capital of Shanxi, who was arrested earlier this month.

Double-digit annual economic growth on the mainland over the past decade has fuelled an enormous demand for coal. Mine bosses and corrupt officials who grew fabulously rich used their wealth to lobby and buy protection from the central government.

Their most important protector is widely believed to be one of the most powerful officials during the rein of Hu Jintao, and also traces his ancestry to Shanxi.

Rumours that the official could be another "tiger" in the sights of investigators have been circulating over the past year, but to date there has been no official confirmation.