A newly chastened Shanghai was retooled by the Party into a bastion of state industry and forced to remit any profits generated by its enterprises to the central government in Beijing, much as had happened in the fifties, leaving nothing for reinvestment at home. In 1983 alone, Shanghai remitted more to the central government in taxes than it had received in investment from Beijing in the entire previous thirty-three years. Shanghai stagnated under Beijing’s thumb for more than four decades, until the early nineties, when politics intervened again, this time in its favour.
Deng Xiaoping, searching for a way to revive the national economy and fend off his left-wing critics in the wake of the Tiananmen massacre, produced the city as his trump card when he returned to the political stage on his 1992 southern tour. Deng lamented that his big mistake in the late seventies had been not to include Shanghai in the first batch of areas allowed to develop the market economy. More than a decade after Deng’s policies had been pioneered in southern China and elsewhere, Shanghai was finally let off the leash.
Shanghai’s leaders inherited a city in the early nineties with a great commercial history that had been emptied of commerce. They wasted little time in getting back into the game. In the decade from 1992, the city roared back to life, spurred by decades of pent-up demand. The visible fruits of this growth–the city’s gleaming skyscrapers, grand public buildings, sweeping flyovers and bustling metropolitan vigour–are a stunning advertisement for Shanghai’s, and China’s, revival. Shanghai’s own turnaround was symbolized by a single image, the spectacular and much-photographed Manhattan-like skyline of the Pudong financial district, an area which only a few years before had been a small, scrappy village.
Streams of foreign visitors have been dazzled by the view of Pudong, usually while clinking glasses on the terraces of the upmarket eateries housed in the colonial-era buildings that line the riverfront strip opposite, known as the Bund. The image this view conveyed–that Shanghai had returned to its entrepreneurial heyday–was far from reality. Unlike southern China and the Yangtze delta region, where Deng’s policies had bred a risk-taking, private economy, Shanghai was developed as a socialist showcase. Few visitors admiring the skyscrapers realized that most of them had been built by city government companies. Far from being the free-wheeling market place that many visitors believed, Shanghai represented the Party’s ideal, a kind of Singapore-on-steroids, a combination of commercial prosperity and state control.
The Shanghai mayor at the turn of the century, Xu Kuangdi, exemplified the city’s bustling political correctness. When he greeted groups of visitors to his office, he would grip each one’s hand and, in a single movement, shake it, while abruptly pulling the bewildered guest towards a waiting seat, before moving on to the next person. This was a man in a hurry, but not in the way that many assumed. One of the most liberal figures in the city government, Xu was unperturbed at the lack of local entrepreneurs. In the short term, he saw it as a virtue. ‘I think parental guidance is very important, especially during adolescence,’ he told me in 2001, striking the kind of unconsciously patronizing tone that only an all-powerful bureaucrat can muster. ‘The government certainly cannot lose its control on the state-owned sector; we are not for the shock therapy that they had in Russia. Look at Japan. When its economy was good, the government was playing a strong role. The same applies to Taiwan and South Korea. Later on, when they introduced free-market principles, they were not so effective.’ Xu expected Shanghai’s private sector to account for about 20 per cent of economic output by 2010, up from a minuscule 1 per cent in 1992.
Chen Liangyu made a similar boast later when defending the city against attacks from rivals who accused Shanghai of being too capitalist. ‘If I am not mistaken, our country’s private enterprises produce over 40 per cent of GDP nationally. Here in Shanghai, state enterprises produce nearly 80 per cent of GDP. If you want to discuss who adheres most to socialism, couldn’t it be said to be Shanghai?’ Chen said, according to a collection of his quotes circulated internally after his downfall. ‘Shanghai has built a model for our country’s socialist market economy. Shanghai has not practised capitalism. For Shanghai to wear that hat on its head would be unsuitable. It wouldn’t fit.’
The evidence suggests that Shanghai’s strong-state policy worked to plan in the fifteen years after the city’s opening. In a remarkable research finding, Yasheng Huang, an MIT economist, established that Shanghai had the lowest number of private businesses relative to the city’s size and its number of households in 2004, bar two other places in China. Only Beijing and Tibet, where government and the military are, respectively, the main businesses, had lower shares of private commerce. The result was that most of the money generated in Shanghai went to the government itself, to pay for infrastructure, its own pet business projects, and, of course, to be siphoned off in corrupt payments. ‘Shanghai is rich,’ said Huang, ‘but the Shanghainese are not.’
Shanghai had something else going for it from the late nineties onwards–heavy political clout in Beijing, through Jiang Zemin and his allies, who formed the largest, most powerful and most coherent faction in the Politburo. The city’s governing philosophy had gained national influence as well, stressing the importance of a strong, wealthy state on permanent stand-by as a counterbalance to the fast-growing private sector. Shanghai’s success as a bastion of state power, combined with its political muscle in the capital, gave it the status to become a test-bed for key reforms, in private housing, capital markets, state enterprises and social security.
The clout of the ‘Shanghai Gang’ in Beijing paradoxically heightened political restrictions in the coastal city. The central government did not want the rest of the country scanning the city’s press for clues about what was happening in the capital. In contrast to Beijing, where there are multiple competing government agencies and political agendas, Shanghai had a single, all-powerful and ever-present city government and a unified, tightly controlled propaganda department. Shanghai had been a big winner from the 1989 turmoil and was always keen to show it had taken the lessons of Tiananmen to heart, becoming just the kind of well-behaved model that Beijing wanted.
Shanghai was careful to write itself some political insurance along the way. Many provinces and cities in China have rules preventing officials from serving in senior posts in their home regions, a device to curtail the entrenchment of local fiefdoms powerful enough to ignore Beijing. Shanghai deliberately flouted this trend, ensuring that the prize jobs in the city were reserved for loyal, hometown cadres. The effect was akin to the advantage gained in intelligence gathering when you are able to glide, silently and unseen, through a targeted town in a car with tinted windows. Shanghai could see out and survey political developments beyond the city, but the rest of China could not see in.
The Shanghainese have always been a clannish bunch, happiest speaking their own dialect and looking outwards to the rest of the world rather than inwards to their fellow Chinese. From their perspective, the city’s revival had simply returned them to a position of power and prominence that their superior intelligence and business acumen merited. The city galloped ahead of the rest of the country during this period. The difference in per capita GDP between Shanghai and poorer inland areas, like Guizhou, nearly doubled in the decade from 1990. But where Shanghai celebrated hard-won success, much of the rest of China resented what they saw as the fruits of political privilege. A staple, sneering joke for people stuck in queues in China around this time summed up the sentiment. ‘Let the comrades from Shanghai board first!’ people jeered. The ill-feeling meant that when the tide began to turn in Beijing, Shanghai was suddenly vulnerable. For Hu Jintao, taking on Shanghai had multiple benefits. It would strengthen his leader ship and make an emphatic statement about his credentials on anti-corruption and economic management. Given the city’s snooty reputation, slapping down Shanghai would be wildly popular in the rest of the country as well.
When Jiang Zemin was appointed party secretary in May 1989, weeks
before the tanks rolled into Beijing, he had to be smuggled into the capital to take up his position. A rattled Jiang was picked up at the airport in a VW Santana, China’s everyman car, instead of the Red Flag limousine then standard for top leaders. He was told to change into worker’s clothes for the ride into town to meet Deng, lest any of the angry demonstrators still filling the streets should spot him.
By comparison, Jiang’s handover of power to Hu Jintao at the 2002 congress, held at around the same time as Xu Haiming received his first eviction notice in Shanghai, was a milestone event in the history of the Party. It was not just the fact that Jiang was replaced by Hu as general secretary, but that he agreed to step down without a public fuss. Hu’s displacement of Jiang was not only the first peaceful handover of power in China since the 1949 revolution, which was notable in itself, but the first in any major communist country at all. In addition, the transition from Jiang to Hu was carried out according to an evolving set of rules in the Party, setting retirement ages for top leaders and ministers, and establishing a new unofficial limit of two five-year terms for the party secretary and premier.
For an authoritarian party with a history of turbulent transitions of power, the smooth handover from Jiang to Hu was immensely important. Each succession in the Soviet Union, from Lenin to Gorbachev, followed a death in office or a purge of the top leader. In China, Mao had nominated his own successor, the hapless Hua Guofeng, who in turn had been ousted by Deng Xiaoping. Deng declined to become party secretary himself but remained the paramount power behind the scenes, later overseeing the removal of two of his protégés, Hu Yaobang and Zhao Ziyang, the latter being then placed under house arrest in 1989 for the remainder of his life. Jiang himself was plucked out of Shanghai in secret as Zhao’s replacement, by Deng and the Party’s then reigning council of elders. ‘Hu’s transition finally took the Chinese government out of the Imperial age and ensured it was no longer a one-man show,’ said Zhou Ruijin, the former editor of Shanghai’s official party newspaper. ‘No one any longer regards the leaders as God.’
Jiang didn’t leave office without trailing his coat. He retained the position of civilian head of the army, as chairman of the Central Military Commission, for another twenty months, to the fury of many officials who saw his decision to stay on as vain and self-indulgent. The nine-member Standing Committee also remained stacked with his men, paid-up members of the Shanghai gang such as Huang Ju, who had worked with Jiang in the city in the eighties and then moved up to Beijing in his slipstream in the years that followed. Jiang’s most notorious crony, Jia Qinglin, was also promoted. But the presence of Shanghai loyalists on the Standing Committee was a lagging indicator, as the 2002 congress marked the high point of the group’s power in national politics.
Hu Jintao had bided his time carefully in the decade before his elevation to party secretary, adopting a scrupulously low profile and avoiding any hint of open disagreement with his rivals. The determination of the top ranks of the Party to avoid the kind of public splits that almost toppled them from power in 1989 had created pressure for the leadership group to work together. So too did the new collective style of leadership, making Hu as much first-among-equals as he was a leader who could dictate policy and personnel decisions at will. For all their co-operation, however, the underlying rivalry between the two men and their camps remained. Hu had been neither welcome nor needed in Shanghai while Jiang was in charge. He didn’t visit the city once between 2000 and July 2004, which was akin to a candidate in the US never visiting New York while campaigning for the presidency. His lengthy absence reflected political calculation as well. Hu made sure that when he did finally visit Shanghai it was firmly on his own terms, as party secretary.
As early as 2001, stories of the Shanghai real-estate market and the blatant profiteering by local officials had begun to make their way to Beijing, through anonymous letters, petitions and reports in the Chinese-language Hong Kong press, and in the English-language foreign media as well. The necessity for Hu to keep Jiang onside did not blind his followers to the opportunities the Shanghai scandal offered. ‘Corruption investigations are always used as leverage,’ a former jailed official told me. ‘They are an essential part of power struggles.’ Hu’s allies had taken note of how Shanghai’s dirt was spreading beyond its borders. Slowly, they began gathering the evidence they could use to clip the city’s wings. Over the next three years, Chen Liangyu, appointed as Shanghai’s new party secretary in October 2002, would succeed in making himself personally vulnerable as well. Instead of maintaining a low profile, Chen gave Beijing every excuse to take him on.
Chen had joined the People’s Liberation Army at seventeen, trained at one of its academies as an architect, before being demobilized to Shanghai, where he was assigned to work in a machine-tool factory. The son of a wealthy, Chicago-educated engineer, he did not join the Party until 1980. Until then, what the Chinese call his bad family background–in other words, his father’s US education–had disqualified Chen from entering politics. Chen’s privileged father had been singled out for struggle sessions in the Cultural Revolution, when he was attacked as an American spy and thrown out of his large family house near Nanjing Road. After 1949, the Red Guards raged, Chen Snr.’s house even had luxuries like a fridge, and was protected, colonial-style, by Indian guards!
Once Chen Jnr. was allowed into the Party, his self-confidence and bumptious personality quickly put him on the fast track. By the mid-eighties, he was in charge of the Retired Cadres Bureau, which offered him a chance to ingratiate himself with powerful party elders, whose patronage was invaluable. He then moved on to head one of Shanghai’s most prosperous districts along the riverfront. As head of the Huangpu district, his signature achievement was the spectacular lighting, every evening, of the strip of colonial buildings along the Bund, the view that still dazzles visitors to the city. With Jiang’s support, Chen was elevated to the city’s party committee, and then to party secretary. Mayor Xu, a popular potential rival, was eliminated from the contest in 2001, dispatched sideways to Beijing, without a single word of explanation.
Xu had joined the Party late in life as well, in his case because of his aversion to its ideological zealotry, and had never been fully trusted by the hardcore of the Shanghai gang. Open-minded and flexible, he was an articulate spokesman for the city, often taking calls from residents on talkback radio in an effort to sell Shanghai’s development plan. Chen, who spoke loutishly by comparison, was no ambassador for Shanghai. ‘Chen’s father is a very cultivated man,’ said one friend. ‘His son was not supposed to be so rough, but that is what the system does to you.’ Chen and his acolytes commanded the city in a way that Mayor Xu, with his weak party networks, never could. ‘Everything revolved around him,’ said one city official. ‘In a way, in Shanghai, he was even more powerful than Jiang Zemin and Huang Ju.’
Chen surrounded himself with loyal former underlings from Huangpu district, his own ‘Huangpu gang’, who went through a metamorphosis similar to that of their boss. Qin Yu, Chen’s political secretary, whose detention a few years later would signal Chen’s ultimate downfall, had once been a modest, meticulous academic at a city university. In office, his friends said, he developed an unrecognizable, self-important swagger that alienated his former associates. Among subordinates, a story circulated about the time Qin had dinner with a former teacher. In place of a once respectful relationship, Qin talked loudly on his mobile phone throughout the meal and ignored his dining companion, a grotesque breach of etiquette in a society which traditionally venerates its elders.
None of this might have mattered much, but for two events, a few years apart, that impacted on each other. One was Chen’s, and Shanghai’s, addiction to grand projects and fast growth at any cost, no matter what diktats they might have received on economic policy out of Beijing to tone their big-spending plans down. But before then, the Shanghai government got caught up in the backlash against a local real-estate tycoon, Zhou Zhengyi, one of the new local cu
rrency billionaires the city’s property market had spawned in the previous decade.
Zhou’s mistake was not that he was a rich, aggressive property developer. There were lots of them. Zhou’s downfall came because he got greedy and careless. Like other officials and businessmen and women who have fallen from grace in China, he committed the cardinal sin of embarrassing the system, and so the system destroyed him. Along the way, though, he became something even more dangerous, a political target. When the complaints about Zhou started to filter up to Beijing, they found many eager ears among Shanghai’s political rivals in the capital. ‘Without Zhou Zhengyi,’ said Xu, the restaurateur-turned-protester, ‘the result for us would have probably been much poorer.’
The son of a poor factory worker, Zhou Zhengyi began his rapid ascent into high society in 1995, using funds from a successful noodle stand business to buy shares in state enterprises issued to employees just before they were partially privatized in stock-market offerings. Zhou maintained his impeccable timing in his next venture, ploughing his profits into land in Shanghai when the private property market was beginning to take off. The businessman quickly gained a dangerously flashy high profile in both Shanghai and Hong Kong, where he acquired a Bentley, an actress girlfriend (and later wife) and a number of listed companies. He kept a London Metals Exchange computer on his desk, to indulge his hobby of trading commodities. ‘He was a young guy, supremely self-confident and a brilliant trader,’ said Rupert Hoogewerf, a Shanghai-based accountant who met him while compiling lists of wealthy Chinese. ‘All of his financial accounts were in his mind.’ Unlike many other entrepreneurs, Zhou was thrilled to appear on Hoogewerf’s rich list. At his peak, he was rated the eleventh richest man in China.
The Party: The Secret World of China's Communist Rulers Page 21
