Behind Shanghai.(land development scandal under investigation )

Staring at the rubble of his neighbors' row houses, Chen Guo-fang says he won't budge. Like more than a hundred residents who protested outside Shanghai's city hall last week, Chen is one of 2,000 homeowners who say that collusion between city officials and a big developer cleared the way for the reportedly $600 million housing project that is now bulldozing their homes. It's the biggest scandal to hit Shanghai in decades, and the victims demand fair compensation. "They can break my fingers but I won't sign any papers," says Chen, a 53-year-old laid-off engineer. "I don't have anything to lose."

At first glance, the scandal enveloping Shanghai Land Holdings sounds like business as usual in post-Mao China. The country's embrace of "cowboy capitalism" has triggered corruption probes from Shenyang to Xiamen to Beijing. But look again: the Shanghai investigation appears to have got off the ground with a letter from the angry homeowners to President Hu Jintao, who is emerging as a powerful, even popular leader far sooner than anyone predicted.

Only eight months ago Hu, 60, replaced the far older, more powerful and charismatic Jiang Zemin as Communist Party leader. The smart bet was that Jiang would continue to run things through allies he had brought to power from his home base in Shanghai. But as the SARS crisis unfolded in April, Jiang stayed so quiet some Chinese joked that he was hiding, while Hu and his ally, Prime Minister Wen Jiabao, used the crisis to prove themselves "and win mass support," says Chinese author Ma Ling. Ma has since shortened a planned trilogy on top leaders to include only Hu and Wen, dropping a member of Jiang's "Shanghai Faction" on the ground that he is no longer so relevant.

Hu has been championing leadership accountability--not exactly a strong point of previous communist czars. In early June the Navy's top two officers and a dozen seamen were sacked after a submarine disaster that killed 70 Chinese sailors. "Hu pushed hard to have the two vice admirals fired," says a well-connected party source. Jiang, who remains head of the powerful Central Military Commission, was said initially to favor covering up the catastrophe.

Hu's government also startled ...