THE ZHU XIAOHUA CASE: A WINDOW INTO CHINESE HARDBALL POLITICS

Publication: China Brief Volume: 2 Issue: 21

By Sheng Xue and Gao Zhan

Despite China’s claim of having an independent legal system, its leaders often exploit legal procedures, making them into proxy battles in their struggle for power. One such example is the handling of the Zhu Xiaohua corruption case, in which Zhu was sentenced to fifteen years in prison two weeks ago for taking bribes, a sentence that surprised many who had thought a death penalty unavoidable given the amount of money he is accused of taking. An inside look into the manipulation of this case offers a window into Chinese hardball politics.

BACKGROUND

Born into an average family in Shanghai, Zhu Xiaohua, 53, one of Premier Zhu Rongji’s proteges, formerly served as chair of China Everbright Group, a state-owned giant heavily engaged in banking and international trade and directly controlled by China’s State Council. Zhu Ronghi appointed him to the position in 1996.

When Zhu Rongji was the mayor of Shanghai, he became impressed with Zhu Xiaohua, who had distinguished himself in the financial arena. After becoming premier in 1998, he appointed his 44-year-old protege to the prestigious post of vice chair of the Central Bank and head of the Foreign Exchange Administration. Thus, the otherwise ordinary Zhu Xiaohua had formally entered the upper echelons of the country’s financial administration, becoming the premier’s right-hand man.

DETENTION

Zhu Xiaohua was stopped in July 1999 immediately after he got off a plane from Hong Kong to Beijing, and subsequently subjected to a pre-detention procedure widely known in China as shuanggui–intense questioning in a designated place at a designated time [“double-d” hereafter]. Formally detained in May 2001, he was arrested the same month. Shortly before Christmas 2000, after he had been double-d’ed, his wife Ren Peizhen committed suicide in Chicago, where she had fled to avoid being detained herself. Their daughter Zhu Yun suffered a nervous breakdown, sinking into the depths of despair. During those three years that Zhu Xiaohua was detained, mostly incommunicado, his friends and family knew nothing of where he was held or the charges against him. Four different trial dates were set between November 2001 and August 14, 2002. Each was delayed without explanation.

THE CHARGES

When Zhu Xiaohua was double-d’ed, he was accused of corruption and racketeering and of using his position to funnel more than RMB800 million (US$100 million) in government loans to his friends. The official indictment, however, says something else. It charges him with two counts of bribery. First, accepting a bribe of 360,000 shares of stock from his clients, which Zhu Xiaohua denies he had ever received. Second, conspiring with his wife to accept a HK$300,000 bribe under the guise of loans, which he denied knowing anything about.

PRE-TRIAL MANIPULATION

The case boils down to a power struggle between President Jiang Zemin and Premier Zhu Rongji in the run-up to the Party’s 16th Congress. Jiang carefully orchestrated the timing of the case to create a flashpoint and win an advantage over Zhu Rongji’s ability to succeed in the party’s 16th Congress.

On August 15, 2002, official Chinese media reported briefly that the Central Commission for Discipline Inspection and the Ministry of Supervision revealed their findings that Zhu Xiaohua had severely breeched ethical protocol and, in fact, had broken the law. Three years into Zhu’s detention, the commission determined that Zhu be expelled from the Communist Party and stripped of his post. The news caused shares of Everbright’s Hong Kong-listed branch–China Everbright, of which Zhu had been chairman–to plunge nearly 18 percent that day. According to Zhu Xiaohua’s relatives, on August 8, 2002, days before the trial was set to begin, Zhu and his lawyers were forced to attend a “training session” in which they were advised on how to cooperate with the prosecutors during trial, in order to ensure that Zhu Xiaohua’s story was consistent and that he would not deny his earlier confession.

The prosecutors mandated that Zhu Xiaohua’s lawyers argue only for the minimum possible sentence. Mounting an innocent defense was not an option. Neither Zhu Xiaohua nor his lawyers would agree to this arrangement, because it would certainly guarantee a death penalty. The four trial delays were due, in part, to the fact that Zhu and his legal team could not be dissuaded from their goal of pleading innocent.

THE TRIAL

After this three-year delay, Zhu Xiaohua’s trial finally opened at Beijing Intermediate People’s Court on August 20. It was held in secret and lasted for nine hours. None of Zhu Xiaohua’s immediate family members were in attendance.

Zhu’s lawyers said that their client was being framed. They asserted that the charges against him were groundless, and that the prosecution had failed to show any evidence of the crimes he was accused of. The prosecution based its evidence on statements of witnesses who were not present at the trial. Some were under detention at the time, and the defense believed that their statements had been coerced and could not or should not be used as proof of Zhu’s guilt.

Zhu was given the opportunity to speak during the proceedings. He complained of having been tortured and subjected to psychological abuse. He was, he said, allowed to meet with his lawyers only once after a trial date had been decided on. He learned about his wife’s death only a day before he was allowed to meet with his lawyers, the day before he was indicted, five months after the fact.

Zhu was devastated and contemplated suicide, angry that he had “confessed” his crimes on the condition that his wife would be released so that their only daughter would not become an orphan. His outrage throughout his trial was unconcealed in his open belligerence to the judge, the prosecutors and the government.

At 7 p.m. the judge announced that the trial was concluded. There was no jury. There are no juries in Chinese trials. There was no verdict. In most such secret trials verdicts, sometimes with the death penalty, are instant. There would, of course, be an appeal, but that is usually concluded with the original verdict intact. Those familiar with the Chinese legal system say that in a case such as this, where so much money is involved, the death sentence is the most likely outcome.

THE VERDICT

Six weeks after the trial, a verdict was finally handed down. Zhu Xiaohua was found guilty of one count of bribery–taking RMB4.05 million from his clients. His savior: Premier Zhu Rongji, who, according to sources from Beijing, intervened by threatening to launch an investigation into Jiang Mianhen, son of President Jiang Zemin, for corruption, should Zhu Xiaohua receive a death sentence. The premier’s reported comment: Zhu Xiaohua does not deserve death.

THE POLITICS

An Everbright insider said that Zhu Xiaohua’s case was brought to the attention of Jiang himself by Kong Dan, vice chair of China Everbright Group, with the help of Minister of State Security Xu Yongyue and CCP Organization Department head Zeng Qinghong. Both are members of China’s “blue-blood league,” descendants of high-ranking party officials and Jiang’s right-hand men. Having inside knowledge of the tension between the president and the premier, and wanting to take advantage of it, Kong and Zeng had broken the normal chain of command, circumvented Premier Zhu and reported Zhu Xiaohua’s case directly to the president. Jiang reportedly commented: “If the 800 million is state property, then this man should be arrested.” He also noted, “Please notify Premier Zhu about this incident,” clearly indicating that he would be watching to see how the premier would dispose of the case.

Jiang Zemin placed the ball in Zhu Rongji’s court because Zhu had pulled the plug earlier on Jiang in the Lai Changxing case, China’s most serious smuggling and corruption case since the Communists came to power. Zhu’s insistence on thorough investigations into the case threatens to expose numerous high-ranking officials, many of whom are Jiang’s henchmen.

In the history of the Chinese Communist Party, all the battles for power have been along political lines, whether left or right. The power struggle within the Party in the Jiang Zemin era goes largely under the guise of the government’s fight against corruption.

Corruption is so rampant that if you randomly pick anyone from any rank of the party or government office, you would have a 90-percent chance of uncovering some degree of corruption. President Jiang knows this. Premier Zhu knows this. Everyone in China knows this.

Picking a corruption case from a rival group and using it to serve the purpose of a power struggle, sometimes at the expense of individuals in cases where the suspects are innocent, is a tactic all-too-widely used by interest groups within the CCP and government power structures.

Jiang Zemin played the tactic with the intention of containing Zhu Rongji, but failed in having an Achilles heel of his own. It is fair to say that the result of the Zhu Xiaohua case is a product of a strategic compromise between the president and the premier in the run-up to the party’s 16th Congress.

Gao Zhan, who suffered a 166-day illegal detention and a mock trial by the Chinese government for conducting research on Chinese social and political issues, is a faculty fellow at American University. Co-author Sheng Xue is a writer and long-time China watcher.

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