VZCZCXRO0521
RR RUEHCN RUEHGH
DE RUEHGH #0193/01 1180650
ZNR UUUUU ZZH
R 280650Z APR 09
FM AMCONSUL SHANGHAI
TO RUEHC/SECSTATE WASHDC 7882
INFO RUEHBJ/AMEMBASSY BEIJING 2742
RUEHCN/AMCONSUL CHENGDU 1949
RUEHGZ/AMCONSUL GUANGZHOU 0405
RUEHHK/AMCONSUL HONG KONG 2117
RHEHAAA/NSC WASHINGTON DC
RUEHSH/AMCONSUL SHENYANG 1940
RUEHIN/AIT TAIPEI 1736
RUEHGH/AMCONSUL SHANGHAI 8527

UNCLAS SECTION 01 OF 03 SHANGHAI 000193 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR EAP/CM, DRL, INR 
NSC FOR KUCHTA-HELBLING 
 
E.O. 12958: N/A 
TAGS: PGOV PHUM ECON EINV CH
SUBJECT: SCANDAL-RIDDEN WENZHOU DEALT ANOTHER BLOW 
 
REF: A. (A) 08 SHANGHAI 505 
     ¶B. (B) 08 SHANGHAI 540 
     ¶C. (C) SHANGHAI 168 
 
(U) Sensitive but unclassified.  Not for dissemination outside 
USG channels; not for Internet distribution. 
 
Summary 
------- 
 
¶1. (SBU) Scandal-ridden Wenzhou in Zhejiang Province was dealt 
another blow on April 1 when a document was posted on the 
internet that identified local officials who illegally bought 
houses at below market prices.  The case reportedly is related 
to the mysterious disappearance last fall of Yang Xianghong, a 
Wenzhou Communist Party official who absconded to France (Ref 
A).  Media reports indicated that Wenzhou residents were 
"outraged" by the housing scandal, especially as it comes on the 
heels of other scandals involving local government officials 
(Ref B).  Separately, a Zhejiang Provincial Disciplinary 
Inspection Commission officer was arrested on April 14, 
reportedly for his involvement in the bribery case of Gome CEO 
Huang Guangyu.  End Summary. 
 
Scandal Strikes Again in Wenzhou 
-------------------------------- 
 
¶2. (SBU) A four-page document entitled, "Name List of External 
Buyers of Extra Relocation Housing at a Temporary Price," which 
indicated that local officials in Wenzhou, Zhejiang Province 
were able to buy houses at far below market prices, captured 
netizens' attention after it was posted on the internet on April 
¶1.  The list clearly showed the buyers' names and positions, as 
well as exact locations, area and room numbers of the houses. 
The listed officials included:  Wenzhou Vice Mayor Chen Zuorong, 
the Vice President of the Wenzhou Committee of the Chinese 
People's Political Consultative Conference (CPPCC), the Deputy 
Director of the Wenzhou Public Security Bureau, Deputy Chief 
Prosecutor of the Wenzhou People's Procuratorate, Office 
Director of Wenzhou's CPC Standing Committee, President of the 
Wenzhou Trade Union General, Director of the Wenzhou Industry 
and Commerce Bureau, and the Director of the Wenzhou Development 
and Reform Commission. 
 
¶3. (SBU) Jin Peijing, Chief of the State Assets Management 
Division of the Wenzhou Old City Reconstruction Headquarters, 
reportedly said in a press interview on April 9 that the list 
was accurate.  Denying her involvement in the scandal, Jin 
called the incident a "historic problem" that occurred in 2004 
and 2005 and refused to comment on details of the case because 
it occurred before she assumed her current post in September 
¶2008. 
 
New Revelations Add Flavor to Previous Case 
------------------------------------------- 
 
¶4. (SBU) According to various news reports related to the 
housing scandal, the Wenzhou Old City Reconstruction 
Headquarters was the work unit of You Jie, the wife of former 
Wenzhou official Yang Xianghong, who absconded to France in 
October 2008 (Ref A).  You Jie was arrested for a "job-related 
crime" on March 31 just prior to the April 1 release on the 
internet of the name list.  (You reportedly was charged by the 
People's Bank of China's Anti-Money Laundering Section for 
remitting RMB 20 million to the bank account of Yang Xianghong's 
daughter in France less than one month before Yang departed for 
France.) 
 
¶5. (SBU) While the name list was not confidential according to 
Jin, it is not clear who posted the list on the internet.  Yang 
Xianghong's sister, Yang Xiaohong, also was named on the list, 
and she reportedly took annual leave right after the list was 
posted online. 
 
Development Zone Official Next Domino to Fall 
--------------------------------------------- 
 
¶6. (SBU) In addition, according to Sina.com, Dai Guosen, 
Director of the Wenzhou Economic and Technology Development Zone 
and a former associate of Yang Xianghong, was under "double 
regulations" by the local disciplinary inspection commission. 
Dai, considered an up-and-coming political figure in Wenzhou who 
was selected as an alternate member of the 9th CPC Wenzhou Party 
Committee in 2003, was accused of an "economic crime" after 
 
SHANGHAI 00000193  002 OF 003 
 
 
disciplinary inspection commission officers reportedly found 10 
Louis Vuitton bags, housing property certificates, and expensive 
Chinese herbs at Dai's house.  Ironically, the 53-year-old Dai 
was the first official in Wenzhou who openly made an 
anti-corruption promise to the public when he was director of 
Wenzhou Economic and Technology Development Zone.  Dai's arrest 
was believed to be somehow related to Yang Xianghong's case. 
 
Wenzhou Citizens Outraged 
------------------------- 
 
¶7. (SBU) Media reports indicated that Wenzhou residents were 
"outraged" by the housing scandal, especially as it comes on the 
heels of other scandals involving local government officials 
(Ref B).  On April 10, homeowners who have not yet been 
compensated for their houses, which originally had been 
demolished to pave the way for the now tainted development, 
protested outside Wenzhou's Lucheng District Government 
headquarters.  According to media reports, when redeveloping 
housing areas, Wenzhou Old City Reconstruction Headquarters 
officials would "pick up several good houses" to sell to staff 
members at below market prices or give to local government 
officials to build relations. 
 
Provincial Inspector Also Dirty 
------------------------------- 
 
¶8. (SBU) Separately from the Wenzhou scandal, the Hong 
Kong-based Ming Pao newspaper reported on April 16 that Wang 
Yuanhua, Party Secretary of Zhejiang's Provincial Disciplinary 
Inspection Commission and a CPC Zhejiang Standing Committee 
member, was arrested in Hangzhou by CPC Central Disciplinary 
Inspection Commission (CDIC) officers on April 14 and was 
transferred to Beijing for an investigation into Wang's role in 
the bribery scandal of former Gome CEO Huang Guangyu.  According 
to the report, Wang was transferred to Zhejiang from Guangdong 
Province in 2006 after rumors surfaced of his involvement with 
Huang when Wang was a Deputy Party Secretary of the CPC 
Guangdong Standing Committee and Party Secretary of the 
Guangdong Provincial Disciplinary Inspection Commission.  Wang, 
along with Chen Shaoji, a former colleague as a Deputy Party 
Secretary of the CPC Guangdong Standing Committee, reportedly 
was charged with having a "corrupt lifestyle." 
 
Appendix: Chronology of a Scandal 
--------------------------------- 
 
¶9. (SBU) The Wenzhou Housing Scandal's timeline is as follows: 
 
--September 19, 2008: Yang Xianghong, Party Secretary of CPC 
Wenzhou Lucheng Standing Committee, led a delegation to France, 
Sweden and Austria for a work inspection tour. 
 
--September 26, 2008: Yang did not attend an official event in 
Vienna, claiming that a preexisting back ailment reoccurred. 
 
--September 27, 2008: Yang and the delegation departed for Paris. 
 
--September 28, 2008: Yang failed to appear at a meeting and 
reception at the Chinese Embassy in Paris, telling delegation 
members that he had a medical appointment. 
 
--September 29, 2008: The delegation departed Paris for China as 
scheduled, but Yang said his illness was quite serious and 
needed to rest in bed. 
 
--October 2008: The Wenzhou Municipal Government dispatched two 
officials to Paris to convince Yang to return to China, but they 
were unsuccessful. 
 
--November 12, 2008: Approved by CPC Zhejiang Standing 
Committee, the Zhejiang Provincial Disciplinary Inspection 
Commission decided to expel Yang from the Party and the 
Government. 
 
--March 31, 2009: Yang Xianghong's wife, You Jie, who was an 
officer in Division of Development of Wenzhou Old City 
Reconstruction Headquarter, was arrested for a "job-related 
crime." 
 
--April 1, 2009: "Name list of external buyers of extra 
relocation housing at a temporary price" appeared online. 
 
 
SHANGHAI 00000193  003 OF 003 
 
 
--April 13, 2009: The Wenzhou Disciplinary Inspection Commission 
confirmed that Dai Guosen, Director of Wenzhou Economic and 
Technology Development Zone, was involved in You Jie's case. 
Dai was under "double regulations" for economic problems. 
CAMP