Photographer: Tomohiro Ohsumi/Bloomberg

China Probes Shanghai Official Who Oversees Free-Trade Zone

  • City's top-ranking official targeted by Xi's graftbusters
  • Ai was previously chairman of Baosteel's listed subsidiary

The director of Shanghai’s free-trade zone is being investigated for corruption, China’s top disciplinary body said, making him the economic development area’s second top official to come under a cloud in less than a year.

Ai Baojun, 55, who also serves as the financial hub’s vice mayor for economic development, was “suspected of severe violations of party discipline,” the Central Commission for Discipline Inspection said on its website Tuesday, using the Communist Party’s term for corruption. The probe makes Ai the highest-ranking Shanghai official ensnared by CCDI since President Xi Jinping came to power in 2012 and began an unprecedented campaign against graft.

ai baojun

Ai Baojun in 2010.

Photographer: Qilai Shen/Bloomberg

Ai has been vice mayor since 2007 and was named director of the free-trade zone -- China’s first national-level area of its type -- at its launch in September 2013. The investigation comes after Dai Haibo, who served as the free-trade zone’s executive deputy director, was accused of corruption in March. Dai’s case was referred to prosecutors in August.

The free-trade zone has been championed by Premier Li Keqiang as a proving ground for financial policies, including freer yuan convertibility and interest-rate liberalization. The zone was given a three-year mandate to conduct policy experiments and introduced deregulation such as lifting the cap on foreign-exchange deposits, cross-border yuan settlement, and offshore yuan loans.

The zone has struggled to catch on, with a March survey of more than 370 members of the American Chamber of Commerce in Shanghai finding that almost three-quarters of respondents saw no tangible benefits for their businesses in the zone. As of September, only about half of the zone’s more than 50 service-and-manufacturing measures had been utilized by companies, said Shen Xiaoming, the party secretary of Shanghai’s Pudong district who also serves as chairman of the zone’s administrative committee. 

Baosteel Executive

Before joining the Shanghai government, Ai held various positions at Shanghai Baosteel Group, ultimately serving as chairman of Baoshan Iron and Steel Co., the state-owned parent’s listed unit. The company was among several state enterprises targeted by CCDI inspections earlier this year, with the anti-corruption watchdog in June saying that "a few leaders" from the company and their families had profited from company business.

In September, a former deputy general manager of Baosteel, Zhao Kun, was removed from his post for breaking party frugality rules, CCDI said. Zhao had worked under Ai, the Beijing News reported Tuesday.

"Baosteel cannot give any comment on Ai’s investigation since he’s been gone from the company for eight years," company spokesman Alex He said by phone.

Baoshan shares rose as much as 3.2 percent to 6.20 yuan in Shanghai trading, their highest level in more than two months. The benchmark Shanghai Composite Index fell as much as 0.8 percent.

Corruption Campaign

Shanghai party secretary Han Zheng, the municipality’s top official, called a meeting on Tuesday to brief local party officials on Ai’s case, according to a statement posted on the government’s website. While Han described the case as “heart-wrenching,” he said the Shanghai leadership “resolutely supported” the investigation and Xi’s “strong will to deepen the battle against corruption.”

Ai had appeared in public as recently as Nov. 6, when he attended an industrial exhibition in Shanghai. 

The case was an indication that Xi’s anti-graft campaign was finally reaching the upper echelons of regions that had been largely spared, including the political power centers of Beijing and Shanghai. CCDI announced Wednesday that Lu Xiwen, a deputy party secretary for Beijing, was being investigated for disciplinary violations, the highest-ranking municipal official swept up in the crackdown.

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