Zhu's Hatchet Man in Guangdong

Article excerpt

In the southern Chinese province of Guangdong, a well-known slogan these days is "To Catch Yu Feis Large and Small." Yu Fei, a former senior party official in the province, is under investigation for exploiting his power for personal gain-a crime punishable in China by death. Several other former provincial officials are also under investigation, but Yu's name has become the rallying cry for the corruption busters. They are a new team of provincial officials appointed by the central government in Beijing, far to the north, and they are also trying to clean up Guangdong's tattered finances and reassert Beijing control over what is China's richest province. In a dramatic move that captured headlines in October, they shut down Guangdong International Trust & Investment Corporation, the province's freewheeling investment arm-leaving a lot of foreign banks holding the bag on loans to GITIC or loans to other companies that were guaranteed by GITIC.

The campaign is a relentless one, and the man behind it, Wang Qishan, inspires fear around Guangdong. He also appears to be headed for bigger roles in Chinese finance. A protege of Zhu Rongji, China's economic mastermind who was named premier last March, Wang, 50, is a graduate of Qinghua University, the Beijing engineering school that Zhu and most of his closest advisers attended. But Wang seems to have a special status among Zhu's inner circle of economic princelings. Wang's father-in-law was Yao Yilin, a former vice premier associated with many of the crackdowns on market excess under Deng Xiaoping. It was Yao, when he headed the state planning commission, who discovered Zhu and helped launch him on the path to power.

Zhu in turn has used Wang every step of the way. In 1992, when Zhu took charge of the People's Bank of China (the country's central bank), he pulled Wang out of a vice presidency at China Construction Bank, one of China's four big state banks, to be vice governor and help fight inflation. When, Yao, then president of CCB, died two years later, Zhu sent Wang back to run the bank.

Wang subsequently distinguished himself by getting CCB's nonperforming loans back under 20% (good by Chinese standards) and by setting up the country's first international investment bank, China International Capital Corporation, in a joint venture with Morgan Stanley Dean Witter. Morgan Stanley knows how tough Wang can be. When Barton Biggs, Morgan's global strategist, turned negative on the Hongkong stock market last year, Wang was enraged. Though Morgan Stanley denies any difficulties, it was subsequently left off the list of underwriters for some major CICC deals, including the flotation of China Telecom, China's largest IPO so far.

Wang looked like he could become China's next central banker. But early this year, Zhu suddenly dispatched him to be Guangdong's executive vice governor. Zhu strategizes, Wang executes," says a Hongkong investment banker, wryly referring to Wang's power to wield the death penalty. (Zhu, when he was central banker, condemned a commercial banker to death for lending to speculators, but it's doubtful that the sentence was carried out.)

In Guangdong, Wang is abetted by two other key Beijing appointees, a new provincial party secretary and a new head of the central bank's local branch, also a Zhu protege. One of Zhu's objectives is to break the grip that provincial bosses have over central bank branches and restore the power to Beijing. But that appears to be only one part of a larger plan. …