THE recent arrest of Shanghai Communist Party boss and Politburo member Chen Liangyu has shaken the Chinese political world and has China watchers astir. China's opaque system of government doesn't lend itself easily to explanation, so a whole cottage industry of analysts and pundits has been at work deciphering what the shake-up means for China's future and how it will affect the business-world.
What is clear is Chen was part of 'the Shanghai clique' of Jiang Zemin loyalists and that a purge is in many ways no surprise as President Hu Jintao continues to shore up his power base.
But the public reason for the sacking of the most senior Politburo official since Zhao Ziyang was purged following the Tiananmen crackdown in 1989 was the scandal involving the alleged misuse of approximately US$400 million of Shanghai's US$1.2 billion pension fund. Tackling corruption has become a major issue as the actions of rapacious officials have increasingly galvanised civilian unrest, unsettling the central government.
Indeed, despite China's advancements on many different fronts since it has become a member of the World Trade Organization (WTO), it has yet to improve the rampant corruption that has plagued the country since its economic reforms began in the late 1970s.
Transparency International - whose corruption index is widely perceived as the global standard - says that China has not improved on this front since 2000 and by some measures has gotten worse.
The China Banking Regulatory Commission (CBRC) reported irregularities involving misused funds of 767.1 billion yuan (S$154.3 billion), for instance, in 2005 alone.
But the arrest is generally seen as a clash between Beijing and powerful regional chiefs about how China will be governed. At the heart of the matter is the philosophy of the Shanghai clique and those like them who favour provincial autonomy in economic affairs, fast growth, and the snug systems of patronage that have coupled officials and businessmen.
This contrasts with the central government's policies of building a more 'harmonious society' characterised by stable growth rates while addressing concerns about pollution and rising inequality.
The convergence of political infighting, the need to tackle corruption, and the disagreement over macro-economic policy seem to have created a political 'perfect storm' that brought down Chen, and threatens to still bring down other powerful figures. The struggle between central power and those of the provinces is in many ways an ancient Chinese story; the country has always struggled with a fractious political landscape as regional fiefs grow stronger, the cost of taking power back to the centre becomes greater. But so does the impact on China's ability to govern itself.
Zhang Jun, director of the China Center for Economic Studies at Fudan University, is among those who hold this view.Business Times Singapore
