(IPS) news feature

As the Chinese leadership enters a pivotal year, one that will decide the makeup of the government for years to come, the activities of leaders' sons are coming under the spotlight and charges of corruption are intensifying.

More than 100 protestors gathered outside the Beijing city legislature recently, demanding that the government reopen a probe into an investment scam allegedly linked to Li Xiaoyong, the elder son of Li Peng, the chief of parliament and former prime minister.

"Li Peng, give us back our money," shouted the protesters.

In December, Securities Market Weekly , a publication that claims a circulation of more than five million copies, ran into trouble with Chinese censorship for attacking the role of Li Xiaopeng, Li Peng's younger son.

He is chairman of the nation's largest independent electricity producer, Huaneng Power International.

Although corruption charges have surrounded the family of Li Peng for years, this time the Communist Party leadership proved particularly sensitive to allegations from the public about high-profile malfeasance and nepotism.

Tiananmen tragedy

Beijing is preparing for a major gathering this fall, at which many of the present generation of leaders will retire. As power struggles ahead of the 16th Party Congress intensify, the future of Communist party princelings is at stake and the airing of corruption charges at this particular moment seems to have touched a sore point.

Memories are still fresh about how in 1989, students protesting at Tiananmen Square were aiming their criticism at Communist Party princelings and the fortunes they had amassed through exploiting their fathers' influence.

More than 10 years later, the children of current leadership are equally vulnerable to protests and smear campaigns as many of them are involved in the privatisation of state assets.

The family of Li Peng, who was prime minister in 1989 and widely hatedfor his endorsement of the bloody crackdown on Tiananmen demonstrators, has always been in the centre of corruption allegations within the electric power industry.

Li Peng is a former minister of power and the main advocate for the construction of the Three Gorges Dam, the biggest hydroelectric dam in the world. During Li's term as premier, his wife, Zhu Lin, was in charge of the Beijing headquarters of the Guangdong Daya Bay nuclear power plant.

Li's relatives are reported to be deeply involved in the current deregulation and privatisation of the power sector. Energy conglomerate Huaneng International was one of the first to list on the New York Stock Exchange and has since listed also in Hong Kong and Shanghai.

An article in the Nov 24 edition of Securities Market weekly alleged that Huaneng Power International was state-owned only in name and has in fact been transformed into a "Li family's business".

While Li Xiaopeng was head of Huaneng Power International, his mother Zhu Lin was the chairman of a company called Huaneng International Development Corp, a parent of Huaneng Power International.

Listed firm

The author of the story, Ma Linhai, maintained further that only the "Li clan's connections" could explain the fact that the company was the only state firm allowed by the government to list on all three stock exchanges.

The power industry has always been regarded by Chinese leaders as a strategic sector and the Communist party has treaded carefully with its privatisation.

The accusations apparently disturbed Beijing leaders and all copies of the Nov 24 magazine were ordered confiscated. The author Ma, identified by the publication as an officer in the People's Armed Police, is said to have been put under arrest.

The article, however, had an immediate effect with China's growing army of stock market investors because it was published in a popular publication, run by China's Stock Exchange Executive Council.

Now, just weeks after the scandal brought by the appearance of the article, Beijing has been stirred by protests against the Li family, focussing on another malfeasance case.

Li Peng is expected to step down from his post as chairman of the National People's Congress or Parliament in 2003, and many in the public hope this would help bring his family to accountability for past wrongdoings.

Last week, protestors in Beijing demanded that the government reopen investigation into the case of the Xinguoda Futures Brokerage Co, which in 1998 was reported to have cheated investors of some 532 million yuan (US$64 million) in investment funds.

Illegal enterprise

Protestors alleged that a government ruling that the Xinguoda was an illegal enterprise was just an excuse used in order to end further investigations into the company's dealings, and to protect the son of a top leader.

"Li Xiaoyong is the elder son of Li Peng, a high official of the People's Armed Police, and the main suspect in the 200 million yuan (US$24 million) missing in the Xinguoda case," a flyer handed out to foreign media said. It further alleged that the armed police's Kanda Trading Company had a five percent stake in Xinguoda, at the behest of Li's son.

"The Xinguoda case is three years old, but now that article seems to have rekindled hopes that Li family might be falling out of grace and people are trying to get their money back," said one Chinese observer, noting that many of Xinguoda's former investors are likely to read Securities Market Weekly .

Only 40 million yuan (US$4.8 million) of Xinguoda's missing funds are reported to have been recovered.

The publication in the tightly controlled state media of an article attacking China's second most-powerful man has spurred rumours even outside investors' circles that this year's Party reshuffle might lead to the downfall of the whole Li family.

Yet others believe that Li Peng would not easily agree to step down from his post without guarantees for his family's well-being and safety. "This is a deal brokered by Deng Xiaoping and Jiang Zemin years ago when Jiang assumed power," said one Chinese source. "Li Peng and his family should remain safe."