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September 2004 • Vol 4, No. 8•

Retaliation for Reform in China?


Police are searching for a man suspected of planting a bomb at the home of Li Huisheng, director of the Anti-corruption Bureau of the Xingtai Municipal People’s Procuratorate, in Hebei province on Aug. 19, the China Daily reported Aug. 24.

The bombing in Xingtai is not the first attack against a Chinese anti-corruption official and will not be the last. This attack is extraordinary not only for its violence, but also because it could potentially be blowback from Beijing’s recently implemented macroeconomic controls. Local government officials have voiced their opposition to the new policies; in this case they might actually have fought back with explosives.

The explosion occurred after a bomb was placed in front of Li’s door and was rigged to detonate when the door was opened. The blast tore through the front of the official’s apartment and seriously wounded his wife. Li, who was in the rear of the apartment when the bomb exploded, was unharmed. Xingtai’s Public Security offered a reward of 10,000 yuan ($1,200) for information on the case.

If the bombing was in fact related to the new macroeconomic controls, Beijing will want to act swiftly and decisively. The relatively new administration of Party Chairman and President Hu Jintao and Prime Minister Wen Jiabao cannot afford direct challenges and outright attacks against its authority and its efforts to regain control over China’s unstable economy.

The bombing in Hebei follows another recent revelation of the violence of China’s anti-corruption battle. On Aug. 11, Huang Jingao, a county Party secretary in Fujian, went public with allegations of official corruption in an open letter to the official People’s Daily Web site. Huang reported that for six years he had worn a bullet-proof vest and hired bodyguards after receiving numerous threats.

Huang was seriously reprimanded for airing the government’s dirty laundry. The Fujian provincial government denied Huang’s allegations and accused him of committing a “grave political error” by writing the open letter without official approval.

Unlike Li and Huang, other anti-corruption officials have been successfully targeted by their enemies. In July 2000, several Chinese government graft investigators were killed in a mysterious fire in the coastal city of Shantou. Two months later, nearly 1,000 central government investigators descended on Shantou in a massive corruption crackdown which included dozens of raids. The investigation centered on a tax scandal involving hundreds of millions of dollars.

The attack against Li probably occurred because he was getting too close to unveiling a ring of corrupt officials. Chinese media has not reported what Xingtai Anti-corruption Bureau investigations are pending. One—among almost limitless possibilities—is that Li’s office was investigating Xingtai Iron and Steel Co., which is preparing to list on Hong Kong’s stock market in the coming months.

The firm has not been publicly named as being under investigation; however, Beijing labeled the steel industry as one of the “most overheated” in the country in addition to aluminum and cement. After investment in the steel sector grew by 107.2 percent during the first quarter of 2004, the central government attempted to control the industry.

In April, the China Banking Regulatory Commission (CBRC) called on banks to stop extending new loans to the steel, aluminum and cement industries for projects scheduled to start in 2004 and awaiting government approval. The CBRC also said it would soon begin spot checks around the country and senior bank managers would be held responsible for any noncompliance. To set an example, the government canceled construction of a $1.3 billion steel plant in the eastern province of Jiangsu, in part because of an unauthorized $300 million loan from the Bank of China.

It is interesting the China Daily—the country’s official English-language newspaper—broke the story, which led it to be picked up by major international media outlets such as the British Broadcasting Corp. The story broke in Chinese-language media Aug. 22, three days after the attack.

The China Daily might have only released the story for damage control. Or Beijing could intentionally be publicizing the case because it intends a broad investigation in response to the bombing and it wants to first send out a message that it will aggressively investigate the case so that similar attacks on anti-corruption officials do not follow. If the bomb proves to be connected to resistance to economic controls it demonstrates the entrenched interests working against economic reform and the weakness of Beijing’s policies—further underscoring the need for a strong reaction from the central government.

Corruption in China often depends on the cozy tri-lateral relationship among local government officials, state-owned enterprise managers and bank officials where the three parties can engineer a series of phony loans that disappear into their pockets.

Look for even more aggressive moves by Chinese authorities against enterprise managers in overheated industries and local government and bank officials within the next several weeks; it will reveal just how scared the government is of losing control of its political and economic system.

—Ocnus.net, August 24, 2004





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