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Date Posted: 10:34 12/02/2004

China: What a carve-up

Gangsters hit the headlines again

CHINESE ORGANIZED crime has been in the news again this week, and has not just focused on the human smugglers from Fujian known as 'snakeheads', who after being entrusted with the life savings of struggling peasant families lured to the coast by tales of glitter and gold, then send them on long circuitous trips on trains and boats before forcing them to work in conditions that verge on slavery, supposedly to pay off the rest of their debts.

Along with Fujian on the southeast coast, the northeast is also well-known as one of China's most corrupt regions. Scores of officials, entrepreneurs and gangsters have been arrested, beaten up by the police, imprisoned or executed over the last decade or so, convicted of a host of crimes including bribery, embezzlement, nepotism, drug-smuggling, prostitution, the murder and intimidation of competitors, and the fraudulent selling-off and buying-up of government property.

Following on from the troubling case of Liu Yong, a mob boss killed by lethal injection last December shortly after a special Supreme Court sitting had rejected his appeal against a death sentence, our attention is drawn this week to yet another case of gangsterism in Liaoning Province, part of China's struggling northeastern rustbelt.

Liu Yong's impact on Liaoning's provincial capital, Shenyang, was immense. An acquaintance told Running Dog that the city is divided about the virtues of the man convicted of 'mafia-like activities' in the city - divided into those who worked for him, and those who were mistreated by him and his associates. Similar stories have been told about Du Yuesheng, mob boss in pre-revolutionary Shanghai and ally of General Chiang Kai-shek.

Du Yuesheng, the Godfather of Shanghai

This week, China Daily provides some of the details of the latest 'underworld organized crime gang' to be exposed. The court case involves 34 people, and features the longest indictment in Chinese legal history. The case involves murder, extortion, smuggling, drug dealing, gambling, burglary and 'a dozen other crimes' in Panjin, an exemplary northeastern city, home to a depleting oilfield, an infamous labour camp and the sort of filthy, debilitating heavy industry that has prompted the government to launch the 'rejuvenate the northeast' policy in the effort to prevent whole cities from collapsing and whole populations from rising up. Once dominated by state-owned industry, it now seems to have fallen under the sway of the Northeast Mafia.

The latest gang to fall foul of the authorities, said to include a former deputy head of the local police as well as a senior official from the Construction Bureau, is the third in the space of two years to be uncovered in the city, according to reports. The overall charge is 'mafia-like activities'.

Panjin's local government website goes into a lot of detail about the perpetrators, most of whom seem to have emerged straight out of a cheap airport novel. Wu Ying, one of the leaders of the gang, was known as Big Brother, and earned his reputation by shooting a police officer in 1997. By 2001, he was even running a refinery and an oil storage depot. Another was Fang Ronggang, who shot four people to death at an oil refinery near the Liaohe Oilfield in December 1995. The big cheese was Liu Xiaojun, who accumulated assets of almost 39 million RMB from 1993 to 2002. Naturally, they all needed government protection, and with the generous distribution of bribes, managed to find it.

What the court means by using the phrase 'mafia-like activities' - as it is doing in Panjin, and as it did with Liu Yong - is not entirely clear, but all gangsters operate under the connivance of at least a part of government. In some cases, they have become the government.

Without a strong legal infrastructure to regulate the way power is deployed, it could even be argued that the highest echelons of society operate like the Corleones. The account of the recent leadership transition at Zhongnanhai by Andrew Nathan and Bruce Gilley, China's New Rulers: The Secret Files, presents a scintillating, Machiavellian tale involving corruption, the calling-in of favours, and a web of byzantine family relationships operating under the aegis of a number of powerful Godfathers known as the Party Elders. Up-and-coming leaders arrange 'sit-downs' with their superiors and air their grievances, make their demands and their compromises, and carve up power.

In Russia after the fall of the Communist Party, thousands of well-placed Party people found themselves on the cusp of reform, and were able to transform their political power into economic power. The infrastructure to manage privatization did not exist, allowing government bigwigs and the members of their families to take advantage, buying and selling state assets on the cheap and earning a fortune. Economists like Joseph Stiglitz believe that China's more measured transition from state control to a free market has cushioned it from the shocks that hit Russia and much of the rest of the Soviet bloc, but it does not appear to have prevented the emergence of the new mafia class.

Some regional authorities are now talking about the forgiveness of what they have started to call 'original sin'. You're a regional party boss, and suddenly the authorities are encouraging privatization and the introduction of market forces. Without the appropriate regulations in place, you find that you can carve up state-owned assets and flog them off on the cheap to your associates. Now, some are saying that those who built their enterprises and earned their fortunes dubiously during the early stages of reform should be reprieved through the use of a statute of limitations. The Communist Party in Hebei Province is currently toying with such a ruling, and it has generated some opposition, especially from central government.

In an unregulated market like China, with its poor legal system, every entrepreneur is tainted by the compromises he is forced to make with the corrupt and chaotic local bureaucracies, including the taxmen. Imagine you are a first time entrepreneur and are suddenly overwhelmed by a punitive tax rate imposed by the local authorities. You find that most of the authorities are on the take, and that your tax rate can be cut significantly if you hand over your bribes, your gifts, your little red envelopes stuffed with cash. It might even be the difference between bankruptcy and survival. Suddenly you find yourself part of the system, and implicated by its practices.

Businessmen are a priori guilty, effectively forced by the system to oil the wheels with bribes and back-handers to well-positioned government officials. The feeling is that the government, should it choose to do so, could bring down anyone. In Russia, the situation is similar, with the crimes of the biggest oligarchs remaining latent, swept up under the arm of the law only when one of them falls foul of the leadership, as Yukos chief Mikhail Khodorkovsky did last year following his decision to ally himself with anti-Putin political parties.

Cancelling this 'original sin', especially in companies that already have 20 years of history, might free a lot of enterprises from the shadow of the Party, but it is part of the efforts to enshrine the right to private property in the national constitution, and to improve the rule of law in the country. Indeed, the Hebei proposals also include a clause saying that 'everything is permitted that is not prohibited by law', which seems a simple legal principle. In China, however, Party fiat is the usual mode of governance, and one is usually presumed guilty until the authorities finally have the motive to do something about it.

These motives usually involve politics, rather than the pangs of conscience. Willy Lam, respected CNN correspondent, notes that the new rules concerning Party discipline are part of the latest salvo in the factional struggle between Hu Jintao and his predecessor as President, Jiang Zemin. Allegations of corruption, even if they are not brought to court, can serve as a 'sword of Damocles' hanging over the heads of political opponents.

Andrew Nathan and Bruce Gilley tell us that in the early 1990s, 'paramount leader' Deng Xiaoping was growing increasingly dissatisfied with the work of Jiang Zemin, Party Secretary, and Li Peng, Premier of the Congress, and was itching to have them replaced. This was not an ordinary power struggle, because it would have involved the rehabiliation of Zhao Ziyang, the Party Secretary ousted in 1989 and put under house arrest for displaying too much sympathy to the student protestors on Tian'anmen Square. In Deng's plans, Zhao would take over as the head of the China People's Political Consultative Congress, essentially a rubber-stamp second chamber that includes non-Party delegates, while other liberal leaders would take over the key positions of Jiang Zemin and Li Peng. Jiang and Li then formed a pact, and the manoeuvring which followed involved implicating their main enemies in a corruption scandal. They both survived.

The legal vacuum doesn't just create a loophole, but also a noose, which tightens retroactively as soon as an entrepreneur or government official has annoyed someone more powerful than himself, or as soon as the delicate balance of political strength has collapsed and reconfigured itself in someone else's favour. Absolving those original sins would, it seems, deprive the Party of leverage over potential opponents.

The case currently under consideration in Liaoning is no doubt just, and the criminals no doubt deserve to be punished, but Running Dog cannot help wondering about the bigger picture.

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