A slightly macabre post today. The news of toy company boss Zhang Shuhong’s suicide in the wake of Mattel’s first global product recall brought to mind another recent suicide, also apparently caused by external pressures. On June 3, Song Pingshun, formerly Tianjin’s representative to the Chinese People’s Political Consultative Conference, was found dead in an apparent suicide as he was being questioned for corruption.

The 61-year-old Song’s rank was equivalent to that of a cabinet minister, because of Tianjin’s economic clout, according to Reuters. Song had held a number of powerful positions in the city over the course of his career, having been vice mayor, chief of police and party official in charge of the judiciary and law enforcement.

Song was expelled from the party posthumously in July, a rare disgrace. From China Daily:

The CPC Central Commission for Discipline Inspection decided to take the rare step of posthumous expulsion after finding that Song had “abused his public power to seek benefits for his mistress, seriously violating CPC discipline.”

“Song, morally degenerate, kept a mistress and helped her obtain money through illegal means,” the discipline watchdog said.

Talk about flogging a dead horse!

Cheeky feline blogger Black and White Cat makes some excellent points about the mysterious circumstances surrounding Song’s death, including the fact that mainland media took nearly a month to report it, and that initial reports couldn’t even determine whether he had suffocated himself or leaped out of a building.

Whether it’s business or politics, it seems suicide is a new way out.

Highlights from the last week of business news in China: A-share action, laws under review and the National Audit Office’s latest findings (more…)

The noted China scholar Minxin Pei was in Shanghai last week to speak at a conference of the Australian Institute of Company Directors. In his session, he gave the skeptic’s view (for which he is quite well known) of China’s economic growth while Geoff Raby, the Australian ambassador to China, presented the optimistic picture. Pei said China’s leadership had created a “monster”, an ever-growing economy which needed to be constantly fed.

“By creating political stability linked to economic growth, the Chinese government has created a monster. The government will have to feed this monster until another monster appears on the horizon,” he said.

I spoke to Pei after his session; here are some highlights:

On China’s economic monster:

“This leadership is not out of touch. The problem is, do they have the political courage, can they organize a new political coalition?

…

The people who benefit from having the first monster around — the growth model is obviously helping a lot of people get rich in relatively small numbers — the current government officials benefit from less accountability.

…

The issue the central government is worried about are systemic risk issues. [But] gains by provinces, cities, are being achieved at a huge cost of future sustainability. But for a local mayor, party secretary, it’s none of his concern. So that’s the biggest problem.

…

The government had one strategy, that is economic growth will solve all the other problems. But nowadays we find out that’s not true. Growth solves some problems, but growth is creating problems. … It’s a constitutional issue: How to devise the system so that local governments maintain autonomy and behave responsibly. Today, both local and central governments are behaving opportunistically.”

On corruption:

“There is no such thing as lubricating corruption. There are two types of corruption, one which I call ‘the toll collector’ — when you go through his department you have to pay a toll. That’s India, you have so many toll collectors, like a highway.

The worst kind of corruption, I’m not going to say China has this, is car-jacking. You kill the driver and take his car, not collect a toll! That’s really the worst kind. It is worse because you take away productive assets, destroy public security. China has both, because the country is so complex. The good areas have toll collector corruption, the really bad areas have car-jacking and Mafia states.”

On the new property and Chongqing ‘nail house’:

“In China, the devil is not in the details; the devil is in execution, implementation, enforcement. The Chongqing case was the one and only [case of individual property rights victory]. You don’t see [more cases] after the Chongqing case; there was a news blackout. That raises skepticism about the replicability of the dingzi hu (nailhouse). [The government] doesn’t want to encourage people. Everybody’s a dingzi hu; how can you build a city… the cost of building a city will spiral.”

The annual meeting of China’s parliament, the National People’s Congress (NPC), is nothing if not predictable. After all, this is the political body that has never actually voted down a policy.

Opening the 10-day jamboree (which, curiously, always seems to see the ethnic minority NPC delegates pushed to the front for photo calls - never let it be said China is not a diverse, equal and caring society), Premier Wen Jiabao hit all the expected buttons.

“The pattern of economic growth is inefficient,” Wen told the 3,000 delegates. “This can be seen most clearly in excessive energy consumption and serious environmental pollution.”

There goes that chemical plant they wanted to build in northern Anhui. And Shandong, Guangdong, Henan, et al.

And it’s not as if the provinces can simply nod in agreement and then do whatever the hell they want any longer. At least, not in theory. Wen noted that many of the problems are down to local governments that have failed to comply with environmental regulations and requirements.

The message is clear: the party’s over boys. China is no longer interested in growth at any cost.

(Incidentally, there is no reason why the message shouldn’t be clear. This mantra has been publicly polished for months now just so it would be nice and shiny for Wen’s big speech.)

The tighter leash to be placed on provinces previously committed to lightning growth is reflected in Wen’s GDP growth projection for 2007 - “around 8%”, down from 10.7% in 2006. Note the “around”. Based on Beijing’s track record, a projection of 8% means they will struggle to keep it below 9-9.5%.

As if things couldn’t get any worse for your provincial official who has grown fat on the government’s tab, Wen added: “Quite a few local governments, government offices and organizations compete with one another for lavishness and spend money hand over foot, which arouses strong public resentment.”

Cue the hearts and minds section of the address, complete with the prerequisite reference to “building a harmonious countryside”. Down with corruption, down with the rich-poor divide and up with farmers’ incomes, buoyed by better education and medical care.

Expect more on the “new Socialist countryside” Tuesday, courtesy of a news conference starring officials from the Chinese People’s Political Consultive Conference.

Come Wednesday and it’s back to controlling the growth express train, with your friendly ticket collector Ma Kai, director of the National Development and Reform Commission.

Perhaps I’m feeling some residual self-righteousness after last night’s viewing of Serpico, the classic Sidney Lumet movie in which the hippified Al Pacino single-handedly takes on the whole dirty-from-top-to-bottom New York Police Department of the early 1970s, but I’m inclined to say something about yesterday’s news about bribes in business reportedly growing.

Reading the story, I was reminded of a conference I recently attended at which panels of high-ranking executives in multinational firms were cheerfully dispensing wisdom on how to handle matters in such a constantly changing environment as China. One particularly slick CEO of a company in a particularly bribery-prone industry had just finished dishing out his own benignly empty platitudes and begun fielding questions from a generally fawning audience, when the question came, quite unexpected: is it your company’s policy to not engage in payoffs, of officials or otherwise? The CEO, still grinning, said that it was a bad idea to get sucked into the whole mess as it would inevitably catch up with you sooner or later. Sage advice, but not exactly an answer to the question posed. Not placated, questioner held on to his microphone, insisting on an unequivocal response. The CEO continued to waffle and an uneasy mood fell over the room. The panel moderator found another guy with a question and a collective sigh of relief was released.

The unspoken answer was: it’s not ideal, but hey, you gotta do what you gotta do.

It speaks volumes about China that the recently crowned richest person in the country has to launch a pre-emptive strike against those who may one day challenge the legality of how she built her fortune.

Zhang Yin, founder of packaging manufacturer Nine Dragons Paper, told reporters in Hong Kong that she “earned every single cent” of the US$3.4 billion that sealed her place at the summit of the Hurun China rich list. She would have come top in the Forbes rankings too had not the compilers decided to separate her Nine Dragons stake from those of her husband and brother.

“All the figures are transparent,” she added and, given the scandals that have enveloped past rich list high-fliers – as well as a few of the current crop – this was a poignant choice of language.

Gome chief Huang Guangyu, who comes in at number two in Hurun and number one in Forbes, is said to be under investigation for illegal loans.

The vultures have already fallen on real estate and highway tycoon Zhang Rongkun (16^th place, class of 2005) for his involvement in the Shanghai pension fund scandal. Fellow real estate player Zhou lingered around the top 10 until he was detained and then jailed in 2003 for fraud.

It is hard not to see an element of irony in how Zhang Yin has made her fortune.

Other Chinese tycoons have hit the headlines for skimming funds off the top of huge piles of public money in the hope that their deceit won’t be spotted in the financial flotsam and jetsam of a perennially wasteful economy.

Zhang’s plan is almost the inverse of this: she has quite literally collected the waste generated by the US economy, repackaged it and sold it in China.

Following the purges of recent weeks, all seems to be running smoothly again at the top of the political food chain.

As reported by the South China Morning Post today (subscription required, or check here instead for our summary), the Central Committee of the Communist Party of China has given President Hu Jintao the thumbs up for his plan to construct a “socialist harmonious society”.

The blessing came in a communiqué released on the last day of an annual gathering of top party members. The gathering will be forever etched into history for the purging of Hu’s political rivals that preceeded it, victims of both the pension fund scandal that has rocked Shanghai in recent months and of their membership of the so-called Shanghai faction, a group of political heavyweights loyal to former president Jiang Zemin.

In a sign of just how harmonious things have become, Hu has even gone so far to appoint the next cab-off-the-rank in the political rivalry stakes, Vice-President Zeng Qinghong, to run the show at next year’s Communist Party congress. It’s a big call because the congress will establish the contenders to take the rudder from Hu when he steps down, most likely in 2012.

As chief lieutenant to Jiang in the days when he occupied the presidency, Zeng’s appointment to the event mangement role is a sure sign Hu is confident the purge has done the trick.

Either that, or its a sign that the pension purge really was about corruption and not about political power plays as widely believed (see for example, CER’s politics and society column for October, unfortunately published shortly before the removal of Chen Liangyu, and the cover story on financial sector reform in the same issue), in which case he’s made a monkey’s uncle out of all of us.

More likely, however, it is Zeng that is the monkey, and not the pundits. To paraphrase an old Chinese saying, it remains to be seen just how scared the killing of Chicken Chen has made Zeng.

But my bet is he’ll be sticking to bananas rather than making a grab for the spoils at the top of the food chain.

“Worry What the People are Worry and Be Happy with What the People are Happy With.”

Apparently this was the promise given by Chen Liangyu on being appointed mayor of Shanghai in 2003 (this was dug up from Google cache as the main link on the search page didn’t work - strange that).

Suspect grammar aside, perhaps he should have been more worried with what Beijing was worried about.

Sun Luyi, 52, a deputy secretary-general of Shanghai’s Municipal Party Committee, has joined the ranks of senior officials implicated in Shanghai’s pension fund scandal, the South China Morning Post reported Friday. As a recap, those in the firing line to date are:

Zhang Rongkun Shanghai Fuxi Investment chairman
Zhu Junyi Shanghai Labour and Social Security Bureau head
Han Guozhang Shanghai Electric executive director
Qin Yu Baoshan district head
Chen Liangyu Shanghai party secretary
Sun Luyi Shanghai party committee deputy secretary-general

And the party purge is not over yet, according to the SCMP

The Shanghai pension scandal just gets hotter and hotter. First Shanghai’s top Party chief, Chen Liangyu, was sacked for gross ethics violations, and now the imminent IPO of Shui On could be endangered by the company’s possible entanglement with the scandal. And investigators have said that there may be more purges to follow.

Most of the commentary on the subject portrays it as a consolidation of power on the part of Hu Jintao. With the party congress coming up next year, many positions of power will change hands, and Hu naturally wants to get his allies into as many posts as possible. The thought that the president might be cracking down on graft simply because it’s the right thing to do is dismissed.

But what about a third possibility? I’ll call it the Enron option: namely, that when routine corruption gets so out of hand as to be potentially damaging to the system as a whole, somebody has to pay. Consider Chen Liangyu and whoever else goes down with him as the Ken Lay and Jeff Skilling of the Shanghai pension scandal. My theory is that, just like with the Enron scandal, this pension thing got so out of hand and so obvious that somebody had to take the rap, to show the people that the leaders are doing something about corruption. Everybody’s happy: the leaders gain face for upholding justice, the people see that justice has been done; but meanwhile, the system remains as it is and things proceed as they always have, with the powerful exploiting the powerless.