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Last Updated: Monday, 25 September 2006, 13:58 GMT 14:58 UK
Power play brings down Shanghai boss
By Quentin Sommerville
BBC News, Shanghai

File photo of Chen Liangyu, right, with Han Zheng in 13 September 2004
Analysts say the clock has been ticking for Mr Chen
Chen Liangyu was the top political figure in China's richest city, Shanghai.

Following his public sacking on Monday, he is now the most senior head to roll since President Hu Jintao took office in 2003.

Mr Chen is accused of being involved in multi-million dollar scandal, in which money from the city's social security fund was illegally invested in a road toll project and in Shanghai's wildly speculative property market.

Two city officials have already been sacked as part of an ongoing investigation.

Shanghai is China's richest city, but it also has the largest number of pensioners dependent on the city's social security fund. As much as a third of the fund may have been misappropriated.

It shows trust in our system, that the boss of the most economically significant city in China can be sacked
Shen Dingli

The city's wealth has given it a degree of independence not enjoyed by other Chinese cities. But that may now be under threat, as Beijing increases its scrutiny of the financial capital.

Shanghai's stock market dropped by only 0.2% in reaction to the news.

But property stocks dropped by 5%, with some investors worried that there would be a tighter regulatory environment imposed from Beijing.

"Things have already been getting tougher for Shanghai," said one banking analyst. "This just makes it easier for Beijing to call the city to heel and cool the property bubble."

But Shen Dingli, a Professor of international studies at Fudan University, says people will be encouraged by the sacking.

"It shows trust in our system, that the boss of the most economically significant city in China can be sacked," he said.

A statement from the Communist Party's central committee said: "Whoever it is, no matter how high their positions are, anyone who violates Party rules or national law will be severely investigated and punished".

Party members can be sentenced to death for corruption, although senior figures often have their sentences commuted to life imprisonment or shorter sentences.

But one Shanghai resident, speaking on condition of anonymity, said Mr Chen's sacking was only a small step.

"I think they should be firmer. There's too much corruption in China, that's why life is so hard for ordinary people.

"Only by taking action like this is there hope for the Communist Party. We don't like our leaders at all because they haven't built a good country and haven't led us well," the resident said.

The news was widely reported across the state-media, and Mr Chen's photograph and speeches were removed from official websites. Rumours that he was about to be sacked began circulating on Chinese internet bulletin boards a week ago.

Politics too

Corruption is a big problem in China. Devolved tax raising powers and poor auditing and oversight have led to a number of high profile cases in the country's provinces.

In December last year Tian Fengshang, a former Minister of Land and Resources, was jailed for taking around half a million dollars in bribes. But Mr Chen's removal could have just as much to do with politics as graft.

1998: Beijing mayor Chen Xitong jailed for corruption
2000: Scores of officials implicated in smuggling scandal in Xiamen
2001: Mayor of Shenyang and his deputy sentenced to death for land deals

He is believed to have clashed with Prime Minster Wen Jiabao over Beijing's attempts to cool the overheating Chinese economy.

And he is a protégé of former Chinese President Jiang Zemin and part of the so-called Shanghai faction. He is thought to have survived an earlier attempt to oust him following Mr Jiang's intervention.

But the former president's political influence is on the wane.

Removing Mr Chen from office may help Hu Jintao as he prepares to strengthen his own position as party leader and Chinese president, in time for next year's Communist Party congress.

Chen Liangyu was dismissed after a probe into alleged misuse of pension funds

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