In Limbo, a City in China Faces Life After Graft
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Version 0 of 1. LÜLIANG, China — For 10 fat years, this mountainous corner of central China was synonymous with the nation’s energy-hungry economic takeoff. Its rich deposits of coal fueled the most frenetic era of the Chinese boom, turning owners of small mines into millionaires and dirty towns into gleaming cities. Now, Lüliang is at the center of one of the most sweeping political and economic purges in recent Chinese history. As President Xi Jinping’s campaign against corruption enters its second year, the Communist Party authorities have made an example of this district of 3.7 million, taking down much of its political and business elite in a flurry of headline-grabbing arrests. Seven of the 13 party bosses who run Shanxi Province, where Lüliang is located, have been stripped of power or thrown in jail, and party propaganda outlets have trumpeted the crackdown in the region as proof that Mr. Xi is serious about rooting out corruption. On Friday, state news media reported a new wave of arrests, with nine more Lüliang officials detained. The reports say the arrests are part of a new emphasis on cleaning up local governments, where officials have extensive powers and few restraints. Among those who have been held up for national humiliation here are Xing Libin, a coal baron who reportedly spent $11 million on his daughter’s wedding, and Zhang Zhongsheng, a local apparatchik accused of using illegal gains to build hilltop mansions. Interviews in Lüliang and in state news reports put the two men at the center of an incestuous network of entrepreneurs and party officials who bought and sold government posts to maintain control of the area’s lucrative coal mines and to finance lavish lifestyles. The downfall of men like Mr. Xing and Mr. Zhang has been cheered by much of the Chinese public, which is outraged by the runaway, often illicit concentration of wealth that has characterized China’s embrace of capitalism. But in Lüliang and elsewhere, Mr. Xi’s prolonged, nationwide crackdown on corruption has also unsettled the party establishment and its allies in business. Even among ordinary residents, there is concern about what it might mean for jobs and growth, because private businessmen have been targeted alongside government and party officials. “In this part of China, officials are held in the palms of the coal barons,” said one shopkeeper, who asked that his name not be used so he could speak freely about a politically sensitive subject. “But these business leaders were capable — they made us prosper.” For much of China’s growth era, party officials and businesses have enjoyed a symbiotic relationship, with policy concessions and market access granted in exchange for corporate support — sometimes direct payoffs, but also more subtle backing of state projects and priorities. Combined with China’s insatiable appetite for coal, that formula helped power Lüliang to its first glimpses of prosperity in generations. But there is a sense now that the rules are changing, with the consequences for the economy uncertain. “In the past, with corruption, you could pay an official and get something done,” said Mao Yushi, a prominent economist in Beijing. “But now the officials won’t accept money, but don’t approve things either.” Nestled in the mountains of the dusty Loess Plateau, Lüliang is best known for having served as a base for the Red Army during World War II. Its valleys are lined with roads blackened by coal that shakes free of the trucks that roll day and night from the mountains to coking plants and steel works. Every few dozen miles, the mountains open up and small urban areas appear. One is Zhongyang, where Mr. Zhang once held court. A short, bullish man who had worked in local government for 39 years, Mr. Zhang controlled the permits that businesses needed to run mines or factories. He rose through the ranks to become deputy chief of the Lüliang region. As the corruption investigation widened, he resigned in March and has been in detention since. Officials like Mr. Zhang controlled the allocation of mines to investors and could close one if they decided it was unsafe. To win them over, coal bosses like Mr. Xing gave them lavish gifts during the Chinese New Year and the Mid-Autumn Festival. The Chinese newsmagazine Caixin spent three months investigating the culture of corruption in Lüliang and concluded that some of the area’s top local businessmen each spent about $150,000 a year bribing officials. The money did more than just grease the wheels of commerce. It also appeared to undermine the Communist Party’s appointment and promotion process. Inner-party voting procedures were rigged, Caixin found, with oligarchs like Mr. Xing channeling money through candidates to pay off the higher-ups who made the decisions. In one case, a government post cost about $650,000. Residents said Mr. Zhang poured his earnings into several mansions, including a huge mountaintop estate. On a recent visit, the entrance to the estate was bricked off, but the mansion was still an impressive sight: Low-slung, made of gray bricks, it hugged the mountain and featured a private park at the summit, complete with banquet halls designed to resemble the cave dwellings still used by many poorer people in Shanxi. Mr. Zhang also had a reputation for promoting his friends and relatives. His wife went from a clerical job to a post as a senior government adviser; his family doctor became the head of a county hospital; and his children’s private tutor was named a school principal. Another relative became the owner of a local coal mine, residents said. “What can we ordinary people do?” asked a 45-year-old hardware store owner who asked to be identified only by his surname, Xu, and who could scarcely contain his contempt when asked about Mr. Zhang. “Is there any official who isn’t corrupt?” But if party officials suspected of corruption are deeply unpopular, residents express more sympathy for the entrepreneurs accused of bankrolling them. Mr. Xing, for example, remains widely respected in Lüliang. Though he has been pilloried on the Chinese Internet over his daughter’s extravagant wedding, people here still speak of him with pride as a local rags-to-riches success and a savvy, hands-on tycoon who created real wealth in the region. Born to impoverished corn farmers in a remote mountain village, Mr. Xing, 47, managed to test into the province’s best university. But unlike most graduates in the 1980s, he turned down a government job and moved back to Lüliang to seek his fortune in China’s newly emerging private sector. Tall and lanky with big glasses and a crooked smile, Mr. Xing looks more like a schoolteacher than a mining executive, but he seemed to have a nose for the industry. He managed an iron mine and a coking factory, then got his big break in 2002, when he bought the giant Xingwu coal mine from the state at a price that was widely criticized as too low, perhaps because officials were paid off. But his defenders note that the mine was losing money, and that Mr. Xing invested in new technology and for several years lived just outside the mine gates to make sure it was being run properly. “My wages doubled after he took over the mine,” said a former mine employee who now runs a motorcycle shop nearby. “He was a man of his word.” Whether Mr. Xing paid a fair price or not, his timing was impeccable. He bought into coal just as China was going through its fastest phase of growth, and just as the government ended price controls on coal used to produce energy. The result was a boom in coal use and profitability for coal mines. Soon, Shanxi coal barons became notorious for conspicuous consumption, sometimes using suitcases of cash to snap up apartments by the dozen in central Beijing. Last year, the Hurun Report’s widely watched list of China’s richest citizens estimated Mr. Xing’s wealth at $520 million. But the local economy benefited, too. In 2000, Lüliang was one of China’s poorest regions. By 2010, its main city had one of the strongest economies in the province. In addition to employing tens of thousands, Mr. Xing’s company, Liansheng, renovated parks and built new schools. “I don’t know what he did, but this is the best high school in the area,” said Chen Xialu, who was waiting outside the Liulin No. 4 High School. “It was built by Xing Libin and Liansheng, so we are grateful.” The prosperity, though, was fragile. Mr. Xing borrowed heavily to expand. The debt could be serviced as long as coal prices were high, but they began to fall in 2012 as the economy slowed. Mr. Xing sought to diversify, using his close ties with local officials to lease farmland and build apartment blocks, small dams, walnut plantations and a paved, solar lamp-lit road from the city to his home village. When coal prices collapsed, Mr. Xing’s company filed to restructure $5 billion in unpayable loans. The housing blocks are still concrete shells, and farmers say that the walnut plantations are not mature enough yet to harvest and that Liansheng owes them money. Mr. Xing was detained in March, and his whereabouts is unknown. “He was capable,” said Wang Zhenhua, a 66-year-old native of Mr. Xing’s home village, Huaishugao. “He built all this and had great ideas. He was just a bit too corrupt.” |