Shanghai's F1 boss in £670m corruption inquiry

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The Independent Online

In the latest sign of China's power base becoming ever more entrenched in Beijing, a corruption investigation in Shanghai has been widened to include the country's former senior statistician and the general manager of the city's state-of-the-art Formula One Grand Prix circuit.

With more than 100 investigators from Beijing occupying a luxury hotel near the city centre, the inquiry has caused a stir in Shanghai, China's financial hub and largest city.

The financial scandal is described as the biggest to strike the city since the onset of economic reforms and political openness in the 1980s. About 10 city officials and businessmen have been targeted and the biggest scalp has been Chen Liangyu, the most senior Communist Party official in Shanghai and a member of the powerful Politburo.

Mr Chen's political ally, Yu Zhifei, the general manager of Shanghai International Circuit, is said to be "assisting investigations" into a scandal involving the abuse of one third of a £670m pension fund to make illegal loans and investments.

The Shanghai government pumped £128m into building the Chinese Grand Prix circuit an hour from the city, to give Shanghai a global profile and boost its image. The third Grand Prix at the track was held at the beginning of October.

A flamboyant figure who started out as a factory boss but worked his way up to the head of the Shanghai Shenhua football club, Mr Yu is a familiar figure on the city's social circuit. He brought Manchester United to Shanghai in 1999.

Also being investigated is Qiu Xiaohua, the former head of China's National Bureau of Statistics (NBS), now mysteriously removed from office.

"Relevant departments, when carrying out investigations into the Shanghai social security fund scandal, found out that Qiu was suspected of being involved in severe violations of party discipline," said Li Xiaochao, a spokesman for the National Bureau of Statistics.

He was removed, without explanation, as the country's senior statistician by China's cabinet, the State Council, last week. He had been appointed in March. Xie Fuzhan was appointed as the new NBS director.

But the backdrop to the investigation is the shifting pattern of how power is brokered in the highly secretive party. The inquiry is happening now because President Hu Jintao wants to consolidate his position and be rid of any remaining supporters of his predecessor, Jiang Zemin. Shanghai is the bastion of officials loyal to Mr Jiang, a former mayor of Shanghai.

Mr Chen had worked with Mr Yu when they were local officials in Shanghai's Huangpu district, and the Shanghai party leader was behind the Shanghai motor-racing track and the £80m Qi Zhong tennis centre, which hosts the prestigious Masters Cup next month.

With a population of 18 million, the world's busiest port and a skyline of gleaming skyscrapers bearing testament to its power as China's financial centre, Shanghai's rise is among the most remarkable urban success stories. Much of that success was forged on the political influence wielded by the city fathers.

Mr Chen was a protégé of Mr Jiang, who built up a strong position in central government in Beijing for a posse of loyal foot soldiers sometimes called "the Shanghai Gang". His dismissal is being widely read as a sign that the balance of power is moving back to the political centre. Beijing has the Forbidden City and is where the central government sits, but it has long lacked the international profile of the flashier financial capital, Shanghai.

But now that Hu Jintao is in control there, and with the Olympics coming in 2008, Beijing is on the rise.

In a separate case, five senior judges in the southern city of Shenzhen have been either detained or questioned in a wide-ranging bribery investigation there.

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