CHINA MINING TYCOON: Liu Han is the first high-profile casualty in the widening investigation into former domestic security chief Zhou Yongkang. REUTERS/STRINGER China’s former domestic security chief tried to make a grab for power during the 2012 leadership transition, sources tell Reuters. The power struggle behind China’s corruption crackdown BY BENJAMIN LIM, DAVID LAGUE AND CHARLIE ZHU SPECIAL REPORT 1 THE POWER STRUGGLE BEHIND CHINA’S CORRUPTION CRACKDOWN BEIJING/HONG KONG, MAY 23, 2014 iu Han seemed to thrive in the com- pany of officials. L Even a birthday party in 2011 for Liu’s primary-school aged son drew a crowd of bureaucrats in Chengdu, the capital of China’s western Sichuan prov- ince where the flamboyant mining tycoon was based. “There was a mayor of a nearby city with a population of three or four million,” recalls Australian political lobby- ist John Halden who helped win approval for Liu’s mining investments in Western Australia and was invited to the October 15 celebration. “There were senior people POWER PLAY: China’s leadership believes Zhou Yongkang was making a move to grab power in 2012. from the provincial treasury and about REUTERS/JASON LEE seven or eight officials from the city of Chengdu.” But Liu’s close ties with officialdom himself and people around him. Several didn’t last. When Chinese President Xi of Zhou’s men have been felled, including Jinping was named President at the end of $14.5 billion Jiang Jiemin, briefly the top regulator of the annual parliamentary session in March The amount of assets seized from state-owned enterprises, and former Vice last year, the 48-year-old Liu was detained Zhou Yonkang’s family members Minister of Public Security Li Dongsheng. and surrounded by a different class of pub- Authorities seized assets worth at least lic servants; corruption investigators and and business associates. 90 billion yuan ($14.5 billion) from Zhou’s prison guards. family members and associates, two sources The billionaire head of the privately- Source: Reuters sources said. Liu’s assets were included in these held Sichuan Hanlong group of companies seizures. Ahead of his trial, the official PATRONAGE NETWORK is the first high-profile casualty of a power Xinhua news agency reported that authori- struggle wrapped in a corruption crackdown To get at Zhou, Xi last year began rolling ties had last year “seized and frozen enor- that is convulsing the senior echelons of the up the strongman’s extensive network of mous amounts assets of Liu Han and the ruling Communist Party. On Friday, a court patronage, assembled over more than four Hanlong group”. in central Hubei province sentenced Liu to decades in the oil industry, Sichuan pro- Zhou is the most senior leader targeted death after a sensational trial on charges of vincial politics and the internal security in a corruption probe since the Communists murder, gun-running, fraud, extortion, ille- services. More than 300 of Zhou’s relatives, took power in 1949. With the approval of gal gambling and a string of other offences. political allies, business associates, under- China’s two previous leaders, Hu Jintao and Liu had denied all the charges. lings and staff, have been arrested, detained Jiang Zemin, as well as other senior offi- Liu’s most serious offense, however, or questioned, according to people briefed cials, sources close to the leadership say, Xi could well be political: He was caught up on the investigation. Liu was one of them. broke with an unwritten rule that incum- on the wrong side of a titanic power play, Investigators have targeted the giant, bent and retired members of the Standing multiple sources say, because of his busi- state-owned China National Petroleum Committee were immune from corruption ness partnership with the son of former Corporation - where Zhou was once investigations. domestic security chief, Zhou Yongkang. general manager and Communist Party The Communist Party’s Central In a campaign unprecedented in modern Secretary - and its subsidiaries. Commission for Discipline Inspection, China, Xi is determined to bring down First, they detained six senior executives China’s top anti-corruption watchdog, and Zhou for making a behind-the-scenes grab from the oil giant late last year. Then, late the Ministry of Public Security declined for power, the sources say. last year, Xi launched a probe into Zhou Text continues on page 4 SPECIAL REPORT 2 THE POWER STRUGGLE BEHIND CHINA’S CORRUPTION CRACKDOWN Closing in on Zhou’s circle Aer former domestic security chief Zhou Yongkang fell from grace, many of his aides and associates have been placed under investigation. He and his wife are currently under house arrest. Family Political allies Sichuan business Oil industry Arrested, in custody and aides associates associates or charged LI CHUNCHENG HUA BANGSONG Fmr. deputy party boss of Sichuan Chairman, Wison Engineering Services GUO YONGXIANG BO QILIANG Fmr. deputy governor of Sichuan Fmr. vice president, PetroChina JI WENLIN WEN QINGSHAN Vice governor of Hainan Fmr. chief accountant, CNPC LI DONGSHENG WEI ZHIGANG Fmr. Vice Minister for Fmr. head Indonesia Public Security operations, PetroChina LI CHONGXI WANG DAOFU Fmr. assistant to Zhou Fmr. chief geologist, PetroChina LI GUANGYUAN RAN XINQUAN Chairman, Sichuan Fmr. vice president, Star Cable (SCS) PetroChina SHEN LUDONG LI HUALIN Managing director, SCS Fmr. deputy general manager, CNPC YANG PING Chief Financial Oicer, SCS WANG YONGCHUN Fmr. vice president, CNPC HE YUYING JIANG JIEMIN Fmr. executive, SCS Fmr. CNPC/PetroChina chaiman HE YAN JIN JIANPING Chairwoman, GoldTel Group Fmr. chairman, Tianjin Jinran Public Utilities LIU HAN JIA XIAOYE ZHOU BIN Wife Fmr. Chinese mining Eldest son magnate with suspected links to Zhou Bin Note: CNPC = China National Petroleum Corp. Ji worked as an aide for Zhou when the latter was land resources minister in the late 1990s. He then followed Zhou to Sichuan province and became one of his secretaries when Zhou was provincial party boss. Also former head of an advisory body to legislature in Sichuan. Died in September; the company did not provide a reason for her death. From a previous marriage. Source: Reuters. SPECIAL REPORT 3 THE POWER STRUGGLE BEHIND CHINA’S CORRUPTION CRACKDOWN to comment on the investigation when TIGERS AND FLIES: reached by telephone. The office of the Chinese President Xi Communist Party spokesman also declined Jinping launched a to comment when reached by telephone. corruption crackdown Although he retired in late 2012 from after taking power in the elite Politburo Standing Committee, November 2012, vowing the apex of political power in China, the to take down both 71-year-old Zhou wanted to rule from be- the high and the low. hind the scenes and had become a threat REUTERS/JASON LEE to leadership stability, according to multiple sources with leadership ties. One of Xi’s influential patrons, former vice president Zeng Qinghong, was the cat- alyst for the investigation into Zhou, three sources with ties to the leadership said. While there is little risk for Xi and his whether to put Zhou on public trial, accord- “Zeng proposed to central (authorities) supporters in taking down Liu, a similar ing to multiple sources with leadership ties. that Zhou Yongkang be investigated for move against someone as senior as Zhou Investigators want “to make it an iron- posing a political risk to the collective lead- Yongkang will take much more political clad case”, one of the sources said. If Zhou ership,” one of the sources said. courage. is charged, the authorities may avoid pub- Neither Zhou nor his representatives “If the leaders are using the corruption lishing detailed allegations to minimize any were available for comment. No evidence crackdown just to bring down their politi- damage to the Party’s image, the sources has emerged that Zhou or his relatives have cal rivals, there will be grim consequences, said. violated any Chinese laws or used Zhou’s as many officials in China are believed Zhou was last seen in public at an alumni influence to clinch deals. to have corruption problems,” says Zhao event at the China University of Petroleum Guangbin, managing director of Shanghai in Beijing on Oct. 1. He has been under “TIGERS AND FLIES” and Toronto-based consulting firm,virtual house arrest since the investigation As part of his vision for a rejuvenated China, Gateway International Group. into his affairs began last year. Xi is preaching a return to the austerity of The government and state media have BUGGING LEADERS the Party’s early years. An attack on cor- not made any official statement about Zhou ruption is at the core of this campaign. Xi or the case against him. An announce- Zhou is believed to have orchestrated the pledges to go after “tigers and flies” in root- ment is expected around the fourth plenum bugging of senior Chinese leaders. At ing out wrongdoing. He warns that popular of the party’s elite 205-member Central Zhou’s behest, Beijing’s civilian intelligence disillusionment with rampant official graft Committee later this year, two sources said. chief Liang Ke ordered his most trusted threatens the Party’s hold on power. Xi and other top leaders have yet to decide men to bug the telephones of Premier Li The beginning of the end Key events in the downfall of Bo Xilai, his patron Zhou Yongkang and their associates November 15, 2011 February 6, 2012 April 2012 May 2012 British businessman Chongqing police chief Wang Bo is stripped of his posts Veteran Communist Neil Heywood dies in a Lijun flees to the U.S. consulate and his wife, Gu Kailai, and Party members write Chongqing hotel room. in Chengdu, seeking asylum, an orderly are investigated in to President Hu Jintao, aer accusing Bo Xilai’s wife connection with Heywood's asking him to sack of the Heywood murder.