VZCZCXRO6566
RR RUEHCN RUEHGH
DE RUEHGH #0316/01 1451003
ZNY SSSSS ZZH
R 251003Z MAY 07
FM AMCONSUL SHANGHAI
TO RUEHC/SECSTATE WASHDC 5859
INFO RUEHBJ/AMEMBASSY BEIJING 1110
RUEHCN/AMCONSUL CHENGDU 0667
RUEHGZ/AMCONSUL GUANGZHOU 0649
RUEHHK/AMCONSUL HONG KONG 0777
RUEHSH/AMCONSUL SHENYANG 0671
RUEHIN/AIT TAIPEI 0541
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHEHNSC/WHITE HOUSE NATIONAL SECURITY COUNCIL WASHINGTON DC
RUEHGH/AMCONSUL SHANGHAI 6260

S E C R E T SECTION 01 OF 03 SHANGHAI 000316 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR EAP/CM, INR/B AND INR/EAP 
STATE PASS USTR FOR STRATFORD, WINTER, MCCARTIN, ALTBACH, READE 
TREAS FOR OASIA - DOHNER/HAARSAGER/CUSHMAN 
TREAS FOR AMB. HOLMER, WRIGHT,TSMITH 
USDOC FOR ITA/MAC - DAS KASOFF, MELCHER, MCQUEEN 
NSC FOR WILDER AND TONG 
 
E.O. 12958: DECL:  X1 MANUAL REVIEW 
TAGS: PGOV PINR EINV ECON CH
SUBJECT: EAST CHINA CONTACTS ON EAST CHINA LEADERSHIP 
 
REF: SHANGHAI 280 AND PREVIOUS 
 
CLASSIFIED BY: Kenneth Jarrett, Consul General, U.S. Consulate 
Shanghai, Department of State. 
REASON: 1.4 (b), (d) 
¶1.  (C) Summary.  During a series of recent meetings, East China 
contacts commented on top leaders in Shanghai and Jiangsu.  With 
his recent appointment as Shanghai Party Secretary, Xi Jinping 
was likely out of the running for a top-level job for the next 
5-10 years.  Meanwhile, Shanghai Mayor Han Zheng was working 
under a cloud, with the threat of corruption investigations 
always looming on the horizon.  Our contacts were mixed on their 
opinions about his current job security, with local officials 
viewing him as a spent force.  Jiangsu Party Secretary Li 
Yuanchao was almost certainly in line for promotion; likely as 
head of the Organization Department, where one contact believed 
he would implement reforms he had piloted in Jiangsu on 
personnel selection procedures.  How high Li rose, however, 
depended in part on relations between Li's mentor Hu Jintao and 
Premier Wen Jiabao, with whom Li had had a run-in a couple of 
years ago.  One contact assessed that the likelihood of 
promotion to the highest levels in the military for Rear Admiral 
Liu Zhuoming, the son of former Politburo Standing Committee 
member and former Central Military Commission Vice Chairman Liu 
Huaqing, had increased since the retirement of his father's 
nemesis, former-President Jiang Zemin.  End summary. 
 
------------------- 
Xi Here For a While 
------------------- 
 
¶2.  (C) During a May 11 discussion, Deputy Director of 
Shanghai's Office of Financial Services Fang Xinghai said that 
with his recent promotion to Shanghai Party Secretary, Xi would 
be out of the running for central government positions for the 
next five to ten years.  During a May 14 discussion with 
Pol/Econ Section Chief, JP Morgan General Manager for Greater 
China Andrew Zhang agreed that Xi would be in Shanghai for at 
least the next five years, but opined that he might be promoted 
to a Vice Premier slot after that. 
 
¶3.  (C) Fang thought Xi's tenure might be good for business.  Xi 
had recently met with a Goldman Sachs executive and later told 
Fang that he enjoyed meeting with leaders of foreign companies. 
During a May 21 lunch with Consul General, Fudan University 
Center for American Studies Director Shen Dingli said that 
Shanghai cadres were still nervous about Xi and what officials 
he would nominate for local positions.  He added that Xi's 
priorities were twofold: show the central government that he 
supported its policies and could maintain stability; and show 
the people of Shanghai that everything was normal and there 
would not be a slowdown in the city's economic development. 
 
¶4.  (C) Shanghai officials' nervousness over Xi was 
understandable, given the recent personnel upheaval in the 
municipal bureaucracy.  Fang explained that Shanghai government 
officials tended to take a different approach than officials in 
other provinces.  When Deng Xiaoping and Jiang Zemin were in 
power, Shanghai was seen by Shanghai's senior leaders as a 
stepping stone to Beijing.  However, most middle managers at 
around the deputy-general level have been happy to stay in 
Shanghai.  This was different from places like Anhui where 
officials were competing for jobs outside the Province.  Thus, 
mid-level Shanghai officials tended to have more personally 
vested interests and engaged in more long-term investment and 
planning, such as in education, health care, or physical 
infrastructure. 
 
-------------------------------- 
Han's Troubles Haven't Gone Away 
-------------------------------- 
 
¶5.  (C) During a May 14 discussion with the Deputy Principal 
Officer, Hong Kong-based (but Beijing-origin) businessman Tang 
Qiongzhang, a friend of United Front Work Department Head and Hu 
Jintao protigi Liu Yandong's husband, said that Shanghai Mayor 
Han Zheng had his own issues that would eventually be 
investigated.  The problem was that the Party could not oust 
both Han and former Party Secretary Chen Liangyu simultaneously. 
 The leadership had decided to move against Chen first and see 
how Han conducted himself, reserving the right to move against 
him later if necessary. 
 
SHANGHAI 00000316  002 OF 003 
 
 
 
¶6.  (C) Tang said that some in the leadership had felt it more 
prudent to move against Chen first rather than risk his 
promotion, when it would have been all but impossible to oust 
him.  Tang opined that if Chen had not been removed, he would 
have "automatically" been promoted to the Politburo Standing 
Committee (PBSC), being the only candidate to represent 
Shanghai's interests on the PBSC if Huang Ju and Zeng stepped 
down.  (Comment: Tang's assumption being that Shanghai was 
entitled to PBSC representation.  End comment.)  Chen's 
corruption problems were not any worse than those of other 
leaders--actually, they were much less severe than many. 
However, Chen was a "disruptive influence" who had constantly 
opposed central policies.  Tang added that you could not find a 
cadre in the system that didn't have a corruption problem. 
 
¶7.  (C) Tang noted that there had always been daylight and 
mutual distrust between Chen and Han.  Chen's wife had a 
position at a bankrupt state-owned enterprise or bank in 
Shanghai that never required her to do any work or even show up 
at the office.  Han had long chided Chen over that particular 
issue.  Shen added that Chen was currently trying his best to 
torpedo Han since he believed that Han played a role in his 
downfall.  Shen had heard that Han would either stay on as 
Shanghai Mayor or, if he came out of the pension scandal 
unscathed, might move to Beijing as deputy director of the 
Organizational Department.  Nanjing University Professor Gu Su 
noted in a May 14 conversation, however, that since Xi Jinping's 
promotion to Shanghai Party Secretary was announced, Shanghai 
officials had stopped calling Han.  The officials assessed that 
Han was a spent force and his days were numbered. 
 
--------------------------------------------- -------------------- 
Li Yuanchao-Pending Promotion May Portend Personnel Pilot Program 
--------------------------------------------- -------------------- 
 
¶8.  (S) Professor Gu said Li Yuanchao was the likely candidate 
to take over either the propaganda portfolio or fill in as 
Director of the Organization Department.  In any event, Li was 
almost certainly heading for Beijing.  Li had told the Nanjing 
University Party Secretary to stop telling people about his 
pending transfer for fear of jinxing his chances. 
 
¶9.  (C) Gu believed that if Li were selected as head of the 
Organization Department, it would be a signal of impending 
reforms.  In 2003, Li began implementing personnel selection 
reforms at the provincial department level head (tingzhang) and 
below.  Under these reforms, any Chinese qualified citizen could 
apply for these positions, regardless of residence (including 
Chinese living abroad).  Would-be contenders had to face both 
written and oral examinations designed to narrow the field. 
Those who passed the exams would then participate in a televised 
live public debate.  While everyone in the province could watch, 
a panel of 200 reviewers comprised of officials above a certain 
level would score each candidate's performance.  The scores were 
tallied and averaged and the party committee then chose the 
person with the highest average score.  It was Li's innovative 
approach to finding the most qualified personnel that had led to 
his being considered for the post of Organization Department 
head.  Gu believed that if Li were promoted to this slot, within 
five years Li's Jiangsu pilot program would be implemented 
nationwide. 
 
------------------------------------------ 
Problems in Li's Past Could Limit His Rise 
------------------------------------------ 
 
¶10.  (C) Although he assessed that Li Yuanchao was a contender 
for a PBSC slot, Gu noted that it was more of a long shot.  Li 
was currently only an alternate member of the Central Committee. 
 A promotion to the PBSC would be a jump of three levels (i.e. 
Central Committee Member, Politburo, and PBSC), making it 
difficult for Hu to justify, particularly if he were also trying 
to get Li Keqiang on the PBSC. 
 
¶11.  (C) Moreover, Li Yuanchao had come under some criticism 
from Premier Wen two or three years ago for Jiangsu's support of 
Tieban Steel.  Under Li, the Jiangsu provincial government and 
 
SHANGHAI 00000316  003 OF 003 
 
 
the Changzhou municipal government had jointly invested in the 
facility, without the approval of the central government.  When 
Wen found out about it, he personally traveled to Jiangsu and 
had several people thrown in jail over the incident.  Gu said Li 
had taken a page from Chen Liangyu's strategy of develop first, 
ask permission later and had personally come under strong 
criticism from Wen.  Gu assessed that if Li ran into problems 
with promotion, they would likely stem from the Tieban incident. 
 The case would also be a bellwether of the Hu/Wen relationship. 
 
-------------------------------------- 
Liu Zhuoming: An Unexpected Princeling 
-------------------------------------- 
 
¶12.  (C) On May 13, the Consul General and Poloff traveled with 
PACOM Commander Admiral Keating to visit the Nanjing Naval 
Command College (NNCC) and meet with its Commandant, Rear 
Admiral Liu Zhuoming.  One of the People's Liberation Army (PLA) 
delegation members informed the CG that Liu's father was former 
Central Military Commission (CMC) Vice Chairman and PBSC member 
Liu Huaqing.  Professor Gu separately commented that Liu 
Zhuoming's prospects for promotion were better now that 
former-President Jiang Zemin's influence was fading.  Liu 
Huaqing had been promoted to the PBSC by Deng to help control 
Jiang when Jiang moved to Beijing in 1989 to be Party Secretary. 
 Later, Jiang had helped orchestrate Liu Huaqing's removal. 
With Jiang retired, his influence over the military has faded. 
For instance, all of the naval commanders Jiang appointed had 
been forced out due to corruption or the 2003 submarine 
accident.  (Comment: In April 2003, Ming-class submarine Number 
361 sank in the Beihai sea, killing all 70 aboard.  Hu's deft PR 
handling of the event--expressing condolences while 
acknowledging shortcomings in training and pledging greater 
support for modernization earned him praise, while Jiang was 
criticized for only extolling martyrdom and avoiding tackling 
the cause of the accident.  End comment.)  Gu, whose former 
student works as a professor at the NNCC, assessed that as a 
princeling with strong credentials, Liu Zhuoming could rise to 
the Central Committee or even eventually be elected as a vice 
chairman of the CMC.  Liu's position, Gu said, was not far below 
that of the Nanjing Military Region Commander. 
 
¶13.  (C) During the official meetings, Liu at first came off as 
wooden and aloof.  He stuck to and read his remarks to Admiral 
Keating and was continually scanning the room.  As the meeting 
progressed, however, it became obvious that Liu had a keen, 
albeit deadpan, sense of humor.  Although he spoke no English 
during the meeting, it was clear that Liu understood a great 
deal, occasionally responding to Admiral Keating's words before 
the translator could speak and at one point laughing at a joke 
before it was translated.  Liu bemoaned the fact that he had not 
been on a U.S. aircraft carrier before and expressed his desire 
to visit PACOM and tour one.  Liu also expressed his hope to see 
a Chinese aircraft carrier operational before he retired. 
Separately, Gu noted that Liu's sister was involved in arms 
sales to foreign countries through Huawei and other military or 
quasi-military companies on whose boards she sat. 
JARRETT