By Benjamin Kang Lim and Ben Blanchard
BEIJING, Dec 4 (Reuters) - The movements of the eldest son of retired Chinese domestic security chief Zhou Yongkang have been restricted while he helps with a corruption investigation, three sources said, a case that could cause division within the ruling Communist Party.
If Zhou Yongkang, 71, one of China's most powerful politicians of the last decade, were directly implicated in the probe, he would be the most senior Chinese politician ensnared in a graft scandal since the Communists came to power in 1949.
"Zhou Yongkang is 100 percent in trouble. The question is will he be put on trial or will he be dealt with internally by the party," Ho Pin, editor-in-chief of New York-based Mingjing News, said by telephone. Mingjing, a media and book publishing firm, has reported extensively on the scrutiny into Zhou since he retired last year.
One of the sources, who has ties to the leadership, said the investigation that Zhou Yongkang's son, Zhou Bin, is helping with was linked to a probe into Jiang Jiemin, until recently the top regulator of state-owned enterprises.
The official Xinhua news agency announced on Sept. 1 that Jiang was being investigated for "serious discipline violations", shorthand generally used to describe graft.
Jiang was previously chairman of energy giant China National Petroleum Corp - Zhou Yongkang's power base - as well as one of its subsidiaries, oil-and-gas behemoth PetroChina .
ZHOU BIN RETURNED FROM OVERSEAS
The three sources told Reuters that Zhou Bin was under quasi-detention on the outskirts of Beijing so he could assist the party's anti-corruption watchdog with the investigation.
"Zhou Bin agreed to return from abroad for questioning by the Central Commission for Discipline Inspection," said a second source, who has direct knowledge of the matter.
All three sources requested anonymity because they were not authorised to speak to foreign reporters about the politically sensitive matter.
Zhou junior and his family could not be reached for comment. It was unclear if he had hired a lawyer. The cabinet spokesman's office, which doubles as the party's public affairs office, declined immediate comment.
The younger Zhou, who is married to a Chinese-American woman and is a U.S. permanent resident, had been barred from leaving the country, the sources said. They said his movements had been restricted for up to six months.
It was unclear where he was staying or when he returned to China, but the questioning began around September.
Zhou Bin, in his 40s, has business interests in China's energy sector, Chinese media have reported.
"The investigation had to do with Jiang Jiemin," the first source said.
Jiang is among several former CNPC and PetroChina executives under investigation. Authorities have given no details on their alleged wrongdoing but the corruption probe is one of the biggest into China's massive state enterprise sector in years.
ELDER ZHOU STILL HAS POWER
Zhou Yongkang was a patron of the once high-flying politician Bo Xilai, who was jailed for life in September for corruption and abuse of power.
Bo's career was stopped short last year by a murder scandal in which his wife was convicted of poisoning a British businessman who had been a family friend.
The elder Zhou retired as domestic security tsar and from the party's all-powerful Politburo Standing Committee during a sweeping leadership reshuffle a year ago.
As security chief from 2007 to 2012, Zhou senior oversaw the police force, the civilian intelligence apparatus, judges, prosecutors and paramilitary police. During his watch, government spending on domestic security exceeded the defence budget.
Given the divisions Bo's downfall triggered among party leaders, any attempt to go after Zhou would cause far worse ructions because he still retains significant political clout and support throughout the party, experts have said.
Hong Kong's South China Morning Post newspaper reported in late August that the leadership had agreed to open a corruption investigation into Zhou Yongkang.
But sources with ties to the leadership told Reuters at the time that Zhou was helping authorities with the investigation into the state energy companies and, contrary to media reports, was not the target. [ID: nL4N0H10ZA]
Zhou was all smiles when he attended an alumni celebration at the China University of Petroleum on Oct. 1.
He was also among party leaders who offered condolences or sent flowers to the family of a respected educator who died last month, state media reported on Nov. 26. Zhou's name would not have appeared if he had been in trouble then.
That could change.
"They're definitely going to do in Zhou Yongkang," said the third source, who has ties to the leadership and the military, adding it was unclear for now if the elder Zhou would be arrested.
The source added that the party was in a quandary about Zhou because there was also a lot of anger within the party over former premier Wen Jiabao's family, following a report in the New York Times last year about how his family used their political connections to accumulate wealth.
China labelled the report a "smear".
"It would look strange to only go after Zhou Yongkang and ignore Wen Jiabao's family," the source said. (Editing by Dean Yates)