SEX, bribes and video confessions have enthralled the citizens of Shanghai as the Chinese leadership tries to turn an embarrassing scandal into a campaign to enforce the law and protect China’s global image.

Every Shanghai official above a certain rank has been required in recent weeks to watch tearful video confessions by 11 of their comrades at the centre of a £200m corruption inquiry, Communist party members say.

The city’s political gossip mill is abuzz with the story that videos of sex sessions between some of the accused and young models, clandestinely shot at one of Chairman Mao Tse-tung’s old guesthouses, were handed as evidence to a team of 200 investigators from the party’s feared disciplinary inspection group.

President Hu Jintao has already used the affair as an excuse to purge a troublesome rival, Chen Liangyu, Shanghai’s party chief.

Now the decimation of Chen’s faction is serving as proof of Hu’s pledge to President Bush last week to clamp down on official corruption that has contributed to the recall of thousands of flawed Chinese products and damaged the nation’s vital export trade.

In the video confessions Chen’s accomplices cry on cue and apologise to the people, the party and the state, all “spontaneously” reciting an ancient saying: “One mistake and sorrow for a thousand years.”

“When they were in power they did whatever they liked, but in the end corruption makes you a prisoner, that’s the message,” confided an official who saw the video.

Now the scene is set for show trials of the 11 followed, presumably, by the ritual denunciation and punishment of Chen himself. So far he has not shared in the public humiliation and is believed to be held in a party detention centre in Beijing.

For the first time in such a politically sensitive case, internal party documents have been leaked before the formal prosecutions have started. Chen’s alleged crimes, reconstructed from documents and interviews with party members, offer a rare insight into how power and money work in the new China.

Chen, 60, was a high-flyer who rose from the rank of an industrial manager in Shanghai to become the city’s leader and a member of the politburo. He attended a course at Birmingham University in 1992, presenting himself as a reformer in charge of the most dynamic city in China.

It was an old-fashioned Chinese scandal of graft and girls that brought him down a year ago. Yet the world-wide repercussions were immense. The affair spelt the demise of the so-called “Shanghai faction”, which stood for unbridled globalisation and capitalism. It boosted the left, which has turned China towards greater social equality and more rights for workers. And it set the stage for a fall in the Shanghai stock market that sent tremors around the globe this year.

In July 2006 the central committee ordered investigators to look into allegations of corruption involving the Shanghai social security fund, the guardian of pensions and benefits for millions of citizens.

The disciplinary inspection group has been dreaded since the days when the Maoists employed it to destroy their critics. It has unequalled powers to detain officials and interrogate witnesses.

Its agents discovered that almost one third of the social security funds had been loaned to an obscure company run by an entrepreneur named Zhang Rongkun. No doubt convinced by their methods of persuasion, Zhang led the investigators to the men at the core of the conspiracy.

One was Qin Yu, secretary to the party chief. The other was Zhu Junyi, head of the social security fund, who would later confess in the video: “Everybody knows that if you don’t use power when you have it, it will expire and be wasted.”

These connections smoothed the way in 2002 for Zhang’s investment company to buy 99% of the shares in a lucrative state-owned toll bridge and highway company.

Then Zhang audaciously used this asset as security for a loan of almost £500m from the Industrial and Commercial Bank of China. He used the money to acquire more toll rights around Shanghai until he controlled more than 100 miles of road, including the route to the city’s Formula One racing circuit.

“My heavens,” said a Shanghai party official, “this millionaire Zhang Rongkun was created by government capital. This kind of magic only happens in China.”

As his political patrons prospered, the youthful Zhang was rewarded with seats on influential party committees. But there was a worm in the bud. Her name was Lu Jiali. She ran a modelling agency and, like many Chinese, was fascinated by new technology. In her case this meant miniature video cameras.

Lu’s agency provided girls to entertain city officials. They favoured a bolt hole in the leafy suburbs of Shanghai where Mao had erected a 1950s guest-house tactfully screened from the masses by lush gardens and trees.

Nobody seems to know why Lu risked making videos of the powerful men who succumbed to the charms of her employees. But they included Qin and Zhu. Connoisseurs of Chinese intrigue are likely to conclude that spies for their political rivals must have engineered the whole thing.

The videos fell into the hands of the disciplinary inspection group, which subsequently arrested Lu and used the evidence to link her clients to the plot.

“Why did I get involved?” said the secretary, according to an official who saw his video confession. “Because I worked 16 hours a day and my salary was just a few thousand yuan. So I lost balance in my heart. Compare this with private bosses who have millions in their wallets and are feasting, playing and enjoying themselves all the time. This is unfair.”

Municipal corruption went far beyond one deal, according to an internal report on August 2 by the party’s disciplinary inspection committee, which was promptly leaked.

It said that Chen took bribes to approve projects, to sell city land to his cronies and to channel state funds in complex deals in return for investments in Hong Kong and well-paid sinecures for his relatives.

The party report accused Chen of “exploiting his power for sexual favours”. Another internal report detailed claims that he kept 10 girlfriends and even brought his mistresses home, ignoring the shame of his wife, said official investigators, who seized £20m from his bank accounts, according to Shanghai newspapers.

Justice, Chinese style, may be orchestrated to coincide with Hu’s presentation of a cleaned-up “harmonious society” at the party’s 17th congress, which will open next month.

Why the crackdown?

Does sex mean shame in Chinese politics? Only if you get caught. Mao Tse-tung is now known to have kept a bevy of dancing girls, so there’s nothing new in that. But mistresses equal money in China, so an official with a lurid love life is suspected of earning more than his meagre salary.

Why is there a crackdown on corruption now? It’s all about politics. There has been a shift to the left. Wealth is rising but inequality between rich and poor has become a poisonous issue for the Communist party, which needs to defuse anger over corruption in high places.

Who is behind it? President Hu Jintao and Wen Jiabao, his prime minister. They have won over party leftists with a plan for a “harmonious society”.

How are the targets selected? Once again it’s all about politics. This Shanghai purge brought down a faction that had challenged Hu’s and Wen’s direction for China. First a secret party investigation will be held. If the case is handed over to public prosecutors, a show trial usually follows. Few, if any, are acquitted. Last July Zheng Xiaoyu, former head of China’s food and drug safety agency, was executed for taking bribes.

Will anything really change? Probably not. Mao eradicated China’s corruption for a period after the revolution but almost destroyed the economy. Today’s rewards of power are too tempting for many who lived through such hardship.

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