China attacks its `tumour of corruption'

In the Chinese port of Xiamen, police cars have surrounded two hotels, the Minnan and the Golden Swallows, for several months…

In the Chinese port of Xiamen, police cars have surrounded two hotels, the Minnan and the Golden Swallows, for several months. Rumours swept the prosperous city that they had been taken over by a team of several hundred investigators looking into an extensive smuggling scandal.

Only in the past few days has what is actually going on in Xiamen, located in the southern province of Fujian, emerged. The investigators are the Chinese equivalent of Elliot Ness and the Untouchables of gangster-era Chicago. They are from the Chinese Communist Party's leading anti-corruption body, the Central Discipline Inspection Commission, and they are out to neutralise a corrupt machine which has been running the city.

But the case goes further than Xiamen. The scandal being uncovered is the biggest in the 50-year history of Communist China, and is roping in senior politicians, military figures, national security officials and business and banking executives, and reaching right up to touch one of the 21 members of the ruling Communist Party Politburo.

The investigation is so sensitive and the results potentially so explosive it is being handled personally by the Politburo anti-corruption chief, Wei Jianxing, who reports directly on the findings to Chinese Vice-President Hu Jintao. Chinese Prime Minister Zhu Rongji, who once told a muck-raking television programme to investigate official corruption all the way up to the top, considers the case so important that he spends half of every day reading reports from Xiamen, according to associates.

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Nothing about the case has yet appeared in the Chinese media, which has published detailed stories on the fate of former Chancellor Helmut Kohl of Germany. But many astute readers will have seen a clue as to what is going on in a published speech last week by China's President Jiang Zemin.

In it he said that the "tumour of corruption" among officials "must be strictly investigated and punished without mercy, no matter how high their ranks or how renowned the offenders".

Mr Jiang seems to be bracing himself to take some of the toughest decisions of his career. One of the figures implicated by association in the scandal is his protege, Beijing party secretary and Politburo member Jia Qinglin, whose friendship with Mr Jiang dates back to the 1960s when they worked together as bureaucrats in the Ministry of Machine Building Industry.

Mr Jia was party chief in Xiamen before he was handpicked to run Beijing in 1996 in the wake of another corruption scandal which led to the disgrace and imprisonment of the former Beijing chief, Chen Xitong. Some months ago investigators arrested Mr Jia's wife, Lin Youfang, an executive of Fujian Import and Export Corporation, the trading arm in Xiamen of the provincial government.

Her interrogation is said to centre on her dealings with the now-defunct company at the heart of the scandal - the Xiamen Yuanhua (Farewell) Group, which is alleged to have smuggled up to $10 billion worth of crude oil, vehicles, electronics and weapons into China over a period of years, thus avoiding payment of high tariffs. Mrs Lin allegedly handled the official documentation for cargoes smuggled into Xiamen, which lies just across a narrow strait from a small island belonging to Taiwan. Mr Jia, who was Xiamen boss at the time, has since divorced his wife, with some sources saying he did so on the advice of the Chinese leadership, on the principle of sacrificing one person to preserve another.

Whether Mr Jia will survive the scandal is now a matter for conjecture but heads are already rolling in Xiamen where the investigation has roped in 200 people, including two deputy mayors. The deputy party secretary, Zhang Zongxu, is said to have died under interrogation.

Fujian Province deputy police chief Zhuang Rushun is reportedly detained indefinitely in one of the hotels to help with the investigation. The head of Xiamen customs, Yang Qianxian, was arrested and taken to Beijing in handcuffs.

Fearing imminent arrest, the Xiamen deputy mayor, Lan Fu, and his wife went on the run two weeks ago, fleeing to Shanghai and then Australia - where authorities are being asked to send them back. Chen Yaoqing, director of the Public Security Bureau in the Fujian city, has since been detained along with a subordinate and accused of helping them flee. Three senior bankers in Xiamen are also caught up in the plot and are being interrogated about unspecified economic crimes, and four officials have been charged with smuggling $141 million worth of equipment made by the Finnish company, Nokia.

Other mammoth cases are coming to light in China under Beijing's cleanhouse policy. The party newspaper, People's Daily, announced on Friday that some £400 million had been embezzled by officials from money earmarked for resettlement of two million people displaced by the country's most prestigious project, the Three Gorges dam on the Yangtze river.

The scale of the investigations highlights the widespread nature of corruption in the fabric of China's communist government. The very top party leadership is untainted by any involvement, and appears to have decided that only drastic action against its own rotten cadres can avoid a collapse of authority and popularity - despite the risk of a revolt by cadres who have long considered that their position gives them a licence to set the economic rules.