The scandal has political and economic repercussions not only for China but for the rest of the world.

The crackdown symbolizes President Hu Jintao's effort to consolidate power and redirect China's economic policies. Hu's predecessor Jiang Zemin was a Shanghainese who rose to prominence through his powerful network in Shanghai. Jiang upheld the policies of his predecessor, Deng Xioping who declared "To get rich is glorious." His tolerance for the chaos and inequities of markets laid the foundation for Shanghai's rise as the financial capital of China. Now Hu is determined to reign in the capitalist free-for-all. His new approach spelled out earlier this month at this year's communist party meeting, calls for a 'harmonious society' and renewed effort to reduce the gap between the rich and poor.

China is still open for business, of course. But the shift in official priorities has brought a new wariness towards foreign investment. China recently declared a moratorium on all foreign acquisitions of Chinese brokerages. Beijing has rebuffed high profile bids from wealthy foreign companies like Citigroup and Carlyle group for major stakes in state owned companies.

The Shanghai crackdown began three months ago and drew national attention in late September when Beijing sacked a protegéeof Jiang, Chen Liangyu, the Shanghai party boss, for alleged corruption. Investigators are focusing on whether some of Shanghai's $1.26 billion social security fund was siphoned off for illicit loans and investments. At least a dozen senior Shanghai officials and businessmen have been detained or dismissed. This weekend's arrest of Zhang Rongkun, one of the country's richest men, is the authorities' first formal arrest.

The concern is that Hu is playing politics and simply shifting wealth and power from Shanghai to Beijing. By restricting foreign investment and growth and rejecting the free market model championed by his predecessors, Hu will reverse years of progress made integrating China's economy with the rest of the world's.