Shanghai's Back. Watch Out.

A new and supremely confident symbol for the city of Shanghai is supposed to be unveiled soon on the historic riverside esplanade, the Bund—presumably by May 1, when the 2010 World Expo will open. It's a gigantic bronze bull created by Arturo DiModica, the Italian-American artist who gave Wall Street its famous mascot, Charging Bull. Press reports have said the Shanghai beast will weigh almost twice its New York brother's 7,000 pounds, and size isn't the only difference. The one on the Bund will be "younger and more energetic, symbolizing the energy of Shanghai's economy," according to local government official Zhou Wei. "Its head will look up, while the Wall Street bull looks down."

It seems as if we're always hearing boasts like that from China's supposed city of the future. But what most outsiders don't realize is that Shanghai's fate has risen and fallen and risen again, along with its political fortunes. The 70 million or more tourists who are expected to visit the expo over the next six months will enjoy the results of a $40 billion makeover—new air terminals and ring roads, and more than 150 miles of new subway line, along with an entirely new waterfront district carved out of docklands and old industrial facilities. The transformation reflects the comeback of the city's brash patrons, the aggressive, antidemocratic political clique known as the "Shanghai gang."

For those who read tea leaves in China, the revival is striking. Back in 2006, when runaway real-estate development was driving people out of their homes and exacerbating Shanghai's rich-poor divide, the central government in Beijing pushed back. Shanghai's powerful Communist Party boss, Chen Liangyu, was dismissed and then convicted for graft and other abuses of power. Major construction projects were shelved or canceled outright. But now the reopening of the money spigot is being taken as hard evidence that the Shanghai boys have regained national influence. Besides projects related directly to the expo—the modern version of the World's Fair, held once every five years—there are signs that megaprojects like the $5 billion magnetic-levitation rail line from Shanghai to Hangzhou are back on track. Real-estate speculation has resumed, with March housing prices up nearly 12 percent from the previous year. And Beijing has officially given its blessing to Shanghai's greater ambitions—to be a global financial center and a nexus for international shipping and logistics by the end of the decade.

The Shanghai faction has no official status, being little more than a loose coalition of officials united by freewheeling economic views and a tough stance on foreign policy. Many of its leading figures are the offspring of veteran revolutionaries, with close ties to the military and public security establishment. In the language of Chinese power rivalries they're part of an "elitist" group that includes well-connected "princelings," in contrast to the "populists" allied with President Hu Jintao and Prime Minister Wen Jiabao. But the terms can be confusing: these populists pursue social justice but avoid rabble-rousing and demagoguery, while the princelings and elitists are by no means too refined for a knock-down, drag-out fight with the rest of the world.

The faction's patriarch, former president and party chief Jiang Zemin, practically vanished from the public eye for several years after yielding the last of his official posts to Hu. Now the long blackout has ended: at the National Day parade in October, state-run TV gave almost as much camera time to Jiang as to the current president himself. And the most popular politician in China these days may be another princeling tied to the faction—Bo Xilai, the current party boss in the city of Chongqing. His campaign to fight organized crime has earned him the sobriquet "China's Eliot Ness," and an online poll by the party mouthpiece People's Daily recently declared him to be "Man of the Year."

China's current vice president, Xi Jinping, is slated to take over the country in 2012. As a former Shanghai party boss, he's closely associated with the gang, and he now seems secure enough to assert himself. "There are some bored foreigners, with full stomachs, who have nothing better to do than point fingers at us," he complained in a private meeting with overseas Chinese in Mexico last year. "First, China doesn't export revolution; second, China doesn't export hunger and poverty; third, China doesn't come and cause you headaches. What more is there to be said?" His fierce resentment of outside pressure is widely shared by the princelings; the hostile demeanor of another individual from the faction became a subject of comment among Westerners at the recent Copenhagen climate summit, when the Chinese delegation brushed off pressure from America and others to commit to binding targets on reducing carbon emissions.

Such assertiveness is typical of the Shanghai faction—which should worry Washington. Hu and Wen have pushed for greener policies and are relatively amenable to talks on issues like whether China's currency, the yuan, is artificially undervalued. The same can't always be said for the Shanghai partisans, who believe in all-out economic growth at almost any cost and are closely associated with policies that favor China's big exporters. Officials at the Commerce Ministry, which has strong ties to the Shanghai gang, have openly denounced U.S. pressure to strengthen the yuan—and thus make Chinese exports more expensive—as "irrational" and "unacceptable to China." The ministry went so far as to send a delegation to America to conduct a media blitz inside the Beltway.

It's true that when Jiang was president, his Western-tinged views sometimes raised eyebrows in China—but that's small comfort. While popular among the haves, the Shanghai faction's policies risk alienating the have-nots. So do the princelings' often privileged backgrounds. To compensate, their expressions of nationalism can be more strident, especially during international negotiations. For now, Hu and the populists are still running things in Beijing—but that may change. "In a year or two, the political pendulum could well swing back toward the elitists," warns Brookings Sinologist Cheng Li. "That will have foreign-policy implications, such as in climate-change talks." The Shanghai gang's rise to power could give new meaning to the phrase "bull in a China shop."

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