China Dissolves Dengs Once-Powerful Office

Chinas leadership has dissolved the once-powerful personal office of 92-year-old patriarch Deng Xiaoping in what could be a sign his health is increasingly fragile, a Chinese source and diplomats said on Wednesday.

Dengs health has stirred intense speculation this week, rocking stock markets in China, Hong Kong and Taiwan on Tuesday and prompting an attempt by Beijing to calm fears.

Japanese media reported that Deng had been admitted to hospital in critical condition, while a Hong Kong newspaper said he was recuperating at home from a brain haemorrhage but was not near death.

Chinas official media on Wednesday made no mention of Dengs health.

The Deng office of advisors and secretaries or Deng ban as it is known in Chinese was dissolved shortly before the Lunar New Year, which fell on February 7, a Chinese source with close ties to the Communist Party said.

If true, it is a signal Dengs health had deteriorated... Deng can no longer sustain a very active role in the political sphere, said a Western diplomat who had heard about the disbanding of the office.

Chinese sources told Reuters on Monday that Communist Party chief and state President Jiang Zemin and Premier Li Peng cut short out-of-town trips last weekend to return to Beijing to visit the ailing patriarch.

Deng has not been seen in public since the 1994 Chinese Lunar New Year festival, when he appeared frail and faltering.

The dissolution of the Deng office also signalled Chinas succession problem was virtually complete and that Jiang had further consolidated power.

Jiang Zemin is eager to tell the world that he is now in charge... and he no longer needs to take directives from Dengs office, the Chinese source said. The office used to issue directives to the current leadership, including Jiang, but was considered to have outlived its usefulness, the source said.

It had been headed by Dengs top aide, General Wang Ruilin, a member of the partys powerful Central Military Commission. Deng Xiaoping has been retired for many years... Dengs office has no direct function, the source said.

Deng, whose pragmatic policies transformed a backward Stalinist state into an economic powerhouse, retired from his last official position in 1990 and his only post now is honorary chairman of Chinas Bridge Association, a title that reflects his lifelong passion for the game. Rumours about Dengs health surface periodically and often have a direct impact on China-related bourses, where Dengs demise is seen by some as a potentially destabilising factor.