President Jiang Zemin appears to be supporting a key Communist Party Politburo member whose former wife is implicated in the biggest corruption scandal in Communist China's 50-year history.
Yesterday state television news showed President Jiang on an inspection tour of Beijing with his Politburo ally, Mr Jia Qinglin, who was grinning broadly.
Mr Jia was the former party boss of the southern port of Xiamen in Fujian province where a now-defunct trading company is at the centre of a state investigation into a smuggling ring alleged to have illegally imported $10 billion worth of arms, cars, oil and telecommunications equipment with the connivance of the city's top officials.
His wife, Ms Lin Youfang, head of the Xiamen Import and Export Corporation, the trading arm for the port, has been detained for questioning about licences issued to the smugglers. Mr Jia divorced his wife only after she became implicated in recent months. He became Beijing's party secretary in 1995, replacing Mr Chen Xitong, the only Politburo member ever jailed for corruption: he was given 16 years in 1998.
The television appearance of President Jiang with Mr Jia has been taken by analysts to signal that he is prepared to protect the Beijing chief, an old ally from the 1960s. Mr Jiang pointedly praised Mr Jia for smoothly organising three important events last year: national day celebrations on October 1st, the hand-over of Macau on December 19th and official celebrations to usher in the new millennium.
The danger for Mr Jiang, who was quoted in the People's Daily yesterday as calling for tough punishment for corrupt cadres, is that if the public perceive Mr Jia to be tarnished, this will reflect on the President as well.
The scandal has begun to affect the Chinese stock market. Shares in Fujian Jiuzhou Group Co, a trading company based in Xiamen, have collapsed since the firm announced last week that several board members were being questioned by Beijing investigators.
The company's former chairman, Mr Zhao Yuchang, was also being questioned. The Shenzhen Stock Exchange quoted a company statement as saying authorities had frozen the assets and bank accounts of Jiuzhou and some of its subsidiaries. Jiuzhou, which also has interests in real-estate development and beer production, is one of the largest companies in Xiamen.
China has asked the Australian government to extradite two alleged leaders of the smuggling ring who fled there in recent weeks. The Chinese leadership has ordered that the case be wound up by the end of February, according to some reports. Dozens of officials in Xiamen have been arrested due to their connection to the smuggling ring.
AFP adds: A prominent US-based Chinese scholar detained last year admitted illegally smuggling and selling state secrets, China said yesterday.
Mr Zhu Bangzao of the Foreign Ministry accused Mr Song Yongyi of illegally smuggling 320 kg of documents out of the country last year. Mr Song was detained by police in China while on a visit last August.