Tale of Chinese Scandal Backfires on Magazine

A magazine that accused the family of China’s No. 2 leader of improper business practices has become embroiled in political controversy months before a key government reshuffle later this year.

A brief but daring article in Securities Market Weekly, a prominent Beijing-based publication, implied that the wife and son of former Premier Li Peng used their connections to turn a Chinese power company into a family fiefdom able to muscle its way onto the New York Stock Exchange.

In ironic tones, the article described Li Xiaopeng, the former premier’s son, as the “helmsman” of Huaneng Power International and his mother, Zhu Lin, as the “captain” of one of Huaneng’s parent companies.

The article suggested that the mother and son parlayed their connections into a “miraculous” rise in Huaneng’s fortunes as one of only a few firms to achieve listings on three different bourses, in Shanghai, Hong Kong and the U.S.

The story appeared in the magazine’s Nov. 24 issue, buried on Page 42. But it sparked an official backlash that forced the magazine to run a lengthy, obsequious apology days later. The article “seriously slandered” Zhu and the younger Li, damaged Huaneng’s reputation and “created an extremely harmful influence,” the apology said.

The controversy comes in advance of this fall’s 16th Communist Party Congress, in which China’s top jobs will be reassigned.

The allegations were apparently serious enough to prompt Zhu to grant a rare interview to another publication, in which she denied any involvement with Huaneng. Her son, however, is indeed chairman of the company, which is China’s largest independent power producer, according to its Web site.

“I have never been general manager or president of any companies,” Zhu said to a reporter from China’s Talents magazine. “I don’t have a single cent of stock, nor any illegal bonds. I do not oppose buying and selling stocks, but I don’t have such ability myself.”

Rumors have swirled among the increasingly feisty state-run media that Zhu was incensed enough by the accusations in Securities Market Weekly to fire off a letter to Chinese President Jiang Zemin, saying that even the Nationalists were better at controlling the media while in power in the 1930s and ‘40s than the Communist government appears to be now.

All copies of the offending issue of Securities Market Weekly have since been withdrawn, its publisher said. References to the story and ensuing dust-up appear to have been excised from Chinese Internet sites.

The story’s author, Ma Hailin, has been identified as a member of the People’s Armed Police force who has written many articles about economics and finance in China. Reports that Ma has been arrested for his incaution could not be confirmed. Others say the magazine barely escaped closure, spared mostly because of the influence of its top brass. Editors at the weekly declined to comment.

The flap has put other media outlets on notice not to cross the line in reporting on the country’s leaders, especially amid the political tightening of social control in advance of the fall congress.

A writer at another magazine said her boss called a meeting to tell his staff to be careful, warning: “Don’t get me in trouble, because I don’t have the same kind of clout as the other publisher.” Another journalist at a national newspaper said his editor did the same. Both journalists requested anonymity.

With the party congress months away, many analysts are on the lookout for possible signs of feuding and jockeying among the nation’s leadership. Trying to discredit rivals by attacking their proxies or family members is a common political tactic in China.

In the Securities Market Weekly story, some observers detect a whiff of the battle between reformers allied with Premier Zhu Rongji and conservatives associated with Li Peng, who was the chief force behind the 1989 Tiananmen Square massacre and who remains a deeply unpopular figure. The weekly magazine comes under the aegis of China’s Securities Exchange Executive Council, considered friendly to Zhu.

But at the same time, an agency headed by one of Zhu’s allies, the China Securities Regulatory Commission, approved Huaneng’s listing on the Shanghai stock market. The listing occurred Dec. 6, two weeks after the controversial article.

“This is certainly a juicy story,” said Bruce Dickson, professor of political science and international affairs at George Washington University. “What is most frustrating is that we don’t really know the motivations behind it, but we will probably see more like it in the months to come if the top leaders are still haggling over appointments and pecking order of the new batch of leaders.”

Li Peng, who is chairman of the Chinese legislature, and his family have long been identified with China’s power industry. A Soviet-trained hydroelectric engineer, Li was minister of power in the early 1980s and before that worked at several regional power plants and bureaus. His wife has also worked in the power industry.

But rumors of her involvement in Huaneng, which operates 13 power plants across China and generated $1.5 billion in sales and revenue last year, “malign me viciously,” Zhu Lin told China’s Talents.

She is not the first high-profile wife to defend herself from allegations of impropriety or corruption. Two years ago, the wife of Beijing party boss and Politburo member Jia Qinglin went on Hong Kong television to dismiss reports that she was implicated in one of the biggest smuggling scandals in modern Chinese history.

China’s leaders are extremely sensitive to public anger over official corruption and complaints that relatives of the powerful have enriched themselves on the strength of their connections.

The government publicizes hundreds of anti-corruption probes every year but quashes any hint of scandal reaching to the very top.