INSIGHT - Failure to end China's labour camps shows limits of Xi's power

By Benjamin Kang Lim and Ben Blanchard BEIJING (Reuters) - Chinese President Xi Jinping has been blocked in efforts to dismantle the country's labour camp system in a clear sign that he has yet to cement his grip on the ruling Communist Party a year after gaining power, leadership sources said. Xi, whose father was sacked as vice premier and then imprisoned for seven years during the 1966-76 Cultural Revolution, is deeply opposed to the use of labour camps for arbitrary detention and his failure to close them suggests he is not as strong as he appears, the sources said. "Xi Jinping loathes re-education through labour," a source who has known Xi since the 1990s told Reuters. Xi had approved a proposal by domestic security chief Meng Jianzhu to eradicate the system but was thwarted by conservative sections of the party, two other sources said. There are several other instances of Xi being unable to push through his decisions. Despite holding the three top posts in the country - president, party chief and head of the military - he is not as strong as he seems, said at least half a dozen sources in the party and government. His two immediate predecessors as president, Jiang Zemin and Hu Jintao, wield considerable clout through allies and protégés they promoted, as do powerful factions within the Communist Party. Xi must keep the two former presidents on his side, but this means an erosion of his power. Xi's choice of General Zhang Youxia as one of two vice chairmen of the Central Military Commission was vetoed by Jiang and Hu, who got two of their loyalists into the jobs, two sources said. Zhang was named a member of the commission and is currently director of the People's Liberation Army's General Armament Department. Xi also failed to promote another political ally, He Yiting, to become the party's top researcher, the sources said. He settled for executive vice president of the Central Party School, which grooms up-and-coming cadres. Wang Huning, who has served both Jiang and Hu, held on to the researcher job. "Jiang and Hu have veto power and some say in major political and economic decisions," said a retired policy official. But despite being obstructed on major political and social change, Xi has implemented considerable economic reform in recent months - on interest rate policy, the banking system and converting Shanghai into a free trade zone - in the face of opposition from powerful ministries and state banks, two of the sources said. However, failure to address some of the political and social ills in China - including regional tensions, the rich-poor gap, corruption and degradation of the environment - could affect stability. On Wednesday, small bombs exploded at a communist party office in northern China, killing one person and injuring eight. Last week, three people from the restive western region of Xinjiang were accused of driving an SUV into a crowd at Beijing's Tiananmen Square and setting it on fire, in what the government said was a terror attack by Islamist militants. Five people were killed, including the three occupants, and more than 40 injured. THIRD PLENUM The fate of any future reform and policy plans should become clear at the third plenum of the party's 205-member Central Committee from November 9 to 12. Traditionally, the third plenum is the venue that Chinese leaders use to spell out the agenda for their term. Since it is a closed-door meeting, party seniors and various factions can express their views frankly, while maintaining the facade of unity. But even without the opposition from the party's old guard, Xi is likely to tread very carefully around any kind of political reform. He is steeped in the party's long-held belief that loosening control too quickly could lead to the disintegration of the country, much like the former Soviet Union under Mikhail Gorbachev. Xi privately mourned the demise of the Soviet Union and will not "dig the (Chinese Communist) party's grave", said a former Red Guard, the paramilitary youth organisation raised by Mao Zedong during the 1966-76 Cultural Revolution. "He will not be a Gorbachev," said the former Red Guard, who, like Xi, is a princeling, or the son of a senior party, government or military leader. Nevertheless, the labour camp reform is close to Xi's heart. He was greatly affected when his father, Xi Zhongxun, was reunited with his family 16 years after he was purged and then jailed. Xi Zhongxun did not recognise his sons and asked: "Are you Jinping or (younger brother) Yuanping?" The whole family broke into tears, Xi Yuanping wrote in an article. Xi, the president, has also tried to crack down on corruption, which he has said is one the biggest threats facing the party. The campaign, which has more bite than previous clamp-downs, has ensnared the top regulator of state-owned enterprises who holds a rank equivalent to cabinet minister. But Xi has so far belied early expectations that as the son of one of China's most liberal leaders, he would bring in reforms across the board. He was pressured by the scandal over Bo Xilai, the pro-Mao party boss of Chongqing city, and courted party conservatives apparently to avert a widening split in the party's ranks and in society. Bo, who was sentenced to life imprisonment this year on charges of corruption and abuse of power, still has many supporters and sympathisers in the party, the government, the military and society. Xi's administration has overseen a renewed crackdown on human rights and civil society activists and freedom of speech. He has made frequent public remarks lauding Mao, the founder of modern China who also launched the brutality of the Cultural Revolution. "Xi is no leftist," said a princeling source with ties to China's military and leadership. "It's for show. He's playing it up for the conservative old guard to win their loyalty." THE REALIST Xi is neither a closet liberal nor an ultra-conservative, but a pragmatist, the sources say. "He cannot just represent one side" of the political spectrum, political commentator Wu Jiaxiang said, referring to hawks and doves. "Xi is seeking the widest common denominator," Wu said. Ultimately, even those who know him well are divided on which way Xi will head over the next decade that he is likely to rule. "Xi Jinping is a filial son. He will not betray his father," said Angela Sun, a businesswoman whose parents have known the Xi family since the 1930s. "The family was democratic. The children could speak their minds freely with their parents," she said, convinced that Xi would usher in real political reform after he consolidates power. Even if that does happen, Xi will not go too far, others said. Any type of Western-style democracy in China is unthinkable. "The red flag cannot fall," said the princeling who was a Red Guard. "There can be shades of red, but changing the colour would be revolution, not reform." For now, Xi is not taking any chances and keeping the genie of political reform in the bottle. "Xi is a realist," said a source with leadership ties. "He will take risks only if they are manageable." (Editing by Raju Gopalakrishnan)