China's leadership has been hit by a fresh scandal ahead of a 10-yearly power handover, with reports a close ally of the president was demoted following his son's death in a Ferrari crash.

China said at the weekend that Ling Jihua, who has close ties to outgoing President Hu Jintao, had been removed as head of the Communist party's powerful Politburo general office and given a new, less high-profile post.

It gave no explanation for the surprise move, but a day later, the Hong Kong-based South China Morning Post, quoting unnamed sources, said Ling's son had died in a high-speed Ferrari crash in Beijing in the early hours of March 18 that also injured two young women, one of whom was naked.

Reports of the crash first surfaced in March on China's popular microblogs, along with speculation that the son of a senior Communist leader had been involved, but were quickly suppressed by the country's army of online censors.

Photographs of the wreckage were briefly circulated online, sparking questions about how the son of a government official could afford a luxury sports car worth a reported five million yuan (around $800,000).

Online searches for the words "Ferrari crash" have been blocked in China ever since, underscoring the huge sensitivity of the issue ahead of the Communist Party leadership handover later this year.

China is wary about any information that highlights the country's growing wealth gap, with its potential to trigger social unrest in the country of 1.3 billion people.

In June, Beijing blocked all web searches for the name of its vice president and likely next leader Xi Jinping after a report by Bloomberg detailing large investments by his extended family.

The latest scandal -- which many Beijing-based political commentators refused to discuss, saying it was too sensitive -- follows the downfall of former leader Bo Xilai, whose wife was last month convicted of murdering a British businessman.

Gu Kailai was found guilty of poisoning Neil Heywood after a multi-million dollar business deal went sour, in a case that raised questions over the lavish lifestyles of some of China's top leaders.

The case ended Bo's hopes of admission to the Politburo Standing Committee, the elite group of Communist leaders who effectively run China, when seven of its nine members stand down at a party congress expected to be held next month.

Both stories centre on the huge wealth amassed by many senior leaders in China -- a highly controversial issue in a country where tens of millions still live in poverty.

Many leaders send their children to be educated abroad -- Bo Guagua, son of Gu and Bo, attended an exclusive British private school before studying at Oxford, and was also reported to have driven a Ferrari.

Analysts said the impact of the latest scandal on Ling's political career remained unclear, but that the reports dealt "another blow" to the legitimacy of the Communist Party after the Bo affair.

"Conspiracy theories proliferate easily, but hard evidence is spare," said Jean-Pierre Cabestan, an expert in Chinese politics at Hong Kong Baptist University.

"What the car crash at least shows is that both Ling's son and Bo's son drive the same kind of car... indicating that neither of them are terribly poor.

"Both stories underscore how rich the top of the Communist Party nomenklatura and their family have become. Another blow to the party's political legitimacy."