Chinese crackdown on corruption nets chief

A PROMISE by China's new leaders to tackle corruption has claimed its first major scalp, the deputy Communist Party chief of Sichuan.

By InvestSMART · 7 Dec 2012

By InvestSMART ·
7 Dec 2012

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A PROMISE by China's new leaders to tackle corruption has claimed its first major scalp, the deputy Communist Party chief of Sichuan.

Li Chuncheng, 56, has been put under investigation and has not been seen in public since November 19, according to Xinhua, the official Chinese news agency.

Mr Li was the second most senior official in the central Chinese province of 80 million people and was promoted last month to be one of the 171 alternate members of the Central Committee, one of the highest organs in the party.

It is not clear what crime he may have committed, but his detention follows the arrest in August of Dai Xiaoming, the chairman of the Chengdu Industry Investment Group, on suspicion of bribing government officials in Chengdu, where Mr Li was once party chief. Mr Dai and Mr Li were both involved in a controversial project by Sinopec, the Chinese oil company, to build a $A10.7 billion petrochemical plant on the outskirts of Chengdu.

Another Chinese leader, Zhou Yongkang, was involved in the project during his time as Sichuan party secretary. Ai Nanshan, a former professor at Sichuan University who campaigned against the plant, said: "Other government officials in Chengdu did not agree with it, but they were gagged and public complaints were suppressed. The local newspapers did not even dare to report that it had gone into operation this year."

Mr Zhou's ties to Mr Li raise the possibility that the anti-corruption drive may be part of a new factional battle. He was a supporter of disgraced former politburo member Bo Xilai.

Mr Li's career has been under a cloud since the Sichuan earthquake in 2008. At the time, he was the party chief of Chengdu and had spent $A169 million on a lavish new government offices. He incurred the wrath of then premier Wen Jiabao by moving into the offices soon after the earthquake and was forced to move out.

China's leadership is still reeling from a series of corruption scandals this year, starting with the case of Bo Xilai. Reports by Bloomberg and The New York Times have revealed the vast wealth accrued by the families of top leaders - including party general secretary Xi Jinping and Mr Wen - leading internet censors to block both organisations' websites.

Analysts say that uncommonly strong anti-corruption language in Mr Xi's speeches, coupled with the appointment of no-nonsense financial expert Wang Qishan as head of the country's anti-corruption commission, signal a tough stand on abuses of official power.

Aggrieved Chinese citizens are increasingly turning to popular microblogging websites to expose corrupt officials. Chongqing official Lei Zhengfu was sacked last week after a 12-second, five-year-old tape showing him having sex with a teenage woman went viral on the microblogging website Sina Weibo.

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Frequently Asked Questions about this Article…

What is the China anti-corruption crackdown that investors are watching?

The article reports a high-profile anti-corruption drive by China’s new leaders that has led to the detention of Li Chuncheng, the deputy Communist Party chief of Sichuan. Analysts point to stronger anti-corruption language from Xi Jinping and the appointment of Wang Qishan to head the anti-corruption commission, signalling a tougher stance on abuses of official power.

Which companies and projects are mentioned in the corruption investigation?

The article links the case to a controversial Sinopec petrochemical project — a A$10.7 billion plant on the outskirts of Chengdu — and to the Chengdu Industry Investment Group, whose chairman Dai Xiaoming was arrested on suspicion of bribing government officials in Chengdu.

How could the investigation into Sichuan officials affect Sinopec’s Chengdu petrochemical plant?

The article notes that both Dai Xiaoming and Li Chuncheng were involved with the Sinopec petrochemical project, and that the project has been controversial locally. While the article does not detail financial impacts, involvement of high-level officials and subsequent investigations could increase scrutiny or delay project operations.

Should everyday investors be concerned about exposure to Chinese state-backed projects?

The article highlights that corruption probes can touch large state-backed projects and senior officials. For investors, this underlines political and execution risk for projects tied to local officials or state-owned enterprises, so it may be prudent to monitor governance and political developments affecting such investments.

What signs of broader political risk in China does the article describe?

The piece describes a series of corruption scandals affecting China’s leadership (including Bo Xilai) and reports revealing wealth tied to top leaders, which prompted internet censorship of outlets like Bloomberg and The New York Times. Analysts interpret Xi’s rhetoric and appointments as an indication of a sustained anti-corruption campaign that could reflect factional battles.

How are ordinary Chinese citizens influencing corruption exposure, and why does this matter to investors?

According to the article, citizens increasingly use microblogging sites (for example, Sina Weibo) to expose corrupt officials; viral posts have led to sackings. This grassroots transparency can accelerate reputational and political fallout for officials and associated projects, creating quicker market or operational impacts that investors should monitor.

What immediate updates should investors monitor about the Sichuan investigations?

Investors should watch official reports (for example Xinhua), news on legal actions or detentions of officials linked to projects, status updates on the Sinopec Chengdu petrochemical plant, and any announcements from involved companies like Chengdu Industry Investment Group. The article notes Li Chuncheng hasn’t been seen publicly since November 19 and Dai Xiaoming was arrested in August.

Does the article suggest how long the anti-corruption campaign might last or its final impact on companies?

The article does not give a timeline or definitive outcomes. It reports a toughening stance by national leaders and the appointment of a high-profile anti-corruption chief, suggesting the campaign may be sustained, but it does not specify long-term impacts on individual companies or projects.