MS5220 -- C O N F I D E N T I A L SECTION 01 OF 02 BEIJING 002112

C O N F I D E N T I A L SECTION 01 OF 02 BEIJING 002112

SIPDIS

E.O. 12958: DECL: 07/23/2034
TAGS: PGOV CH
SUBJECT: TOP LEADERSHIP DYNAMICS DRIVEN BY CONSENSUS,
INTERESTS, CONTACTS SAY

REF: A. BEIJING 2063
¶B. BEIJING 2040

Classified By: Political Minister Counselor Aubrey Carlson. Reasons 1.
4 (b/d).

Summary
-------


¶1. (C) The need for consensus and the desire to protect
vested interests are the main drivers of Politburo Standing
Committee (PBSC) decision-making and Chinese leadership
dynamics in general, according to Embassy contacts with
access to leadership circles. Contacts have variously
described relations at the top of China's Party-state
structure as akin to those in the executive suite of a large
corporation, as determined by the interplay of powerful
interests, or as shaped by competition between "princelings"
with family ties to party elders and "shopkeepers" who have
risen through the ranks of the Party. End Summary.


Hu Jintao as Chairman of the Board?
-----------------------------------


¶2. (C) Chinese Communist Party (CCP) Politburo
decision-making is similar to executive decision-making in a
large company, two well-connected contacts say. xxxxx that Party General
Secretary Hu Jintao could be compared to the Chairman of the
Board or CEO of a big corporation.xxxxx, used the
same analogy in a May 18 meeting with PolOffs. xxxxx said that
PBSC decision making was akin to a corporation in which the
greater the stock ownership the greater the voice in
decisions. "Hu Jintao holds the most stock, so his views
carry the greatest weight," and so on down the hierarchy, but
the PBSC did not formally vote, xxxxx. "It is a
consensus system," he maintained, "in which members can
exercise veto power."


¶3. (C) xxxxx had told PolOff previously that he knew "on very
good authority" that "major policies," such as the country's
core policy on Taiwan or North Korea, had to be decided by
the full 25-member Politburo. Other more specific matters,
he said, were decided by the nine-member PBSC alone. Some
issues were put to a formal vote, while others were merely
discussed until a consensus was reached. Either way, xxxxx
stated sarcastically, the Politburo was the "most democratic
body in the world," the only place in China where true
democracy existed. xxxxx said that although there was
"something" to the notion of a rough factional balancing at
the top between the Jiang Zemin-Shanghai group and the Hu-Wen
group, neither group was dominant, and major issues had to be
decided by consensus.


Leadership Dynamics: Driven by Vested Interests
--------------------------------------------- ---


¶4. (C)xxxxx asserted to PolOff March 12 that the Party should be
viewed primarily as a collection of interest groups. There
was no "reform wing," xxxxx claimed.xxxxx made the same
argument in several discussions with PolOff over the past
year, asserting that China's top leadership had carved up
China's economic "pie," creating an ossified system in which
"vested interests" drove decision-making and impeded reform
as leaders maneuvered to ensure that those interests were not
threatened. It was "well known," xxxxx stated, that former
Premier Li Peng and his family controlled all electric power
interests; PBSC member and security czar Zhou Yongkang and
associates controlled the oil interests; the late former top
leader Chen Yun's family controlled most of the PRC's banking
sector; PBSC member and Chinese People's Political
Consultative Conference Chairman Jia Qinglin was the main
interest behind major Beijing real estate developments; Hu
Jintao's son-in -law ran Sina.com; and Wen Jiabao's wife
controlled China's precious gems sector.


¶5. (SBU) Note: In a development that could fan the "vested
interest" rumor mill, China-related websites in the United
States this week were reporting that a Chinese security
technology company with links to Hu's eldest son, Hu Haifeng,
was being investigated in Namibia on charges of corruption.
A July 19 article in a Malaysian paper, cited by a U.S.-based
dissident website, wenxuecity.com, reported that Hu Haifeng
was a "potential witness" in the case but was not himself a
suspect. The report said that the younger Hu was a former
CEO of Nuctech and currently the Party Secretary of its

Beijing 00002112 002 of 002



parent company, Tsinghua Holding Co. Ltd. According to the
China Digital Times website at the University of California
Berkeley's China Internet Project, the Central Propaganda
Department on July 21 issued orders to block any reference to
the case in the PRC media. End note.


¶6. (C) xxxxx, had told PolOff earlier that
leaders had close ties to powerful economic actors,
especially real estate developers and corporate leaders, who
in some cases were officials themselves. The same was true
at the local level, xxxxx stated. He claimed that these
interest networks had policy implications since most local
leaders had "bought" their positions and wanted an immediate
financial "return" on their investment. They always
supported fast-growth policies and opposed reform efforts
that might harm their interests, xxxxx. Vested
interests were especially inclined to oppose media openness,
he said, lest someone question the shady deals behind land
transactions. As a result, the proponents of "growth first"
would always be in a stronger position than those who favored
controlling inflation or taking care of the poor, xxxxx.


¶7. (C) xxxxx that the central feature of leadership
politics was the need to protect oneself and one's family
from attack after leaving office. Thus, current leaders
carefully cultivated proteges who would defend their
interests once they stepped down. It was natural, xxxxx said,
that someone like Xi Jinping, who maintained a
non-threatening low profile and had never made enemies, would
be elevated by Jiang Zemin and Zeng Qinghong. Xi would act
to ensure that Jiang was not harassed or that Jiang's corrupt
son would not be arrested, xxxxx.


Princelings vs. Shopkeepers
---------------------------

¶8. (C)xxxxx, separately
described leadership alignments at the top of the CCP as
shaped largely by one's "princeling" or "shopkeeper" lineage.
In separate conversations in recent months, xxxxx said that some argued that China's
"princelings," the sons and daughters of prominent Communist
Party officials, including many who helped found the PRC,
shared a perception that they, as the descendents of those
who shed blood in the name of the Communist revolution, had a
"right" to continue to lead China and protect the fruits of
that revolution. Such a mindset could potentially place the
"princelings" at odds with Party members who do not have
similar pedigrees, xxxxx, such as President
Hu Jintao, Premier Wen Jiabao and Party members with a CYL
background, who were derisively referred to as "shopkeepers'
sons." xxxxx had heard some princeling
families denounce those without revolutionary pedigrees by
saying, "While my father was bleeding and dying for China,
your father was selling shoelaces."
Goldberg