Friday, June 02

MIRO CERNETIG
China Bureau
Wednesday, May 31, 2000

Beijing -- At the zenith of his meteoric career, Mou Qizhong was China's most famous tycoon. He ran a trading empire worth $360-million, bought a national soccer team, fielded North Pole expeditions and even vowed to buy an aircraft carrier so China could flex itself as an ocean-going military power.

But yesterday it all came crashing down as the 59-year-old high flier was sentenced to life in prison for corruption. His fall from grace marks the biggest rags-to-riches-to-jail story to hit China in 22 years of economic reform.

Once billed as the "famous tycoon" -- he was the fourth-richest man in the Middle Kingdom, according to Forbes Magazine in 1994 -- Mr. Mou was found guilty of foreign-exchange fraud involving more than $100-million in loans from the state-controlled Bank of China.

Having once been touted by the Communist Party as one of China's outstanding private entrepreneurs, Mr. Mou has been transformed into the personification of the corruption hobbling China's economy.

"It's hard not to view this as a seminal event," said a Western diplomat, who asked not to be named.

"In the 1990s, China's leaders wanted to create business stars to show the Chinese masses and the
world that China could swim with the big-league capitalists. Now the leadership wants people to blame for the problems of the market economy's darker side. Mou Qizhong has gone from being China's Horatio Alger to Darth Vader."

The flamboyant Mr. Mou liked to comb back his black hair and swim in the Yangtze River, in the style of Chairman Mao Tsetung. But details of his crimes are sparse. It appears that after the Chinese government curtailed banking credit in the mid-1990s, Mr. Mou lost access to the public loans that his company, The Land Economic Group, relied on to keep it afloat. Lawsuits piled up as Mr. Mou was asked to pay back the loans, something he could not do without new loans.

China's state-run television disclosed yesterday that he was found guilty of loan fraud by the Intermediate Peoples Court in Wuhan, the city in Hubei province where he built his empire. He was found guilty of supplying fraudulent information to the bank to get 33 letters of credit aimed at easing his cash crunch.

The company was fined almost $1-million and some executives were also jailed. Mr. Mou's son, Mou Chen, and his accountant received three years each.

"The losses were huge and the crime was serious," the state-run television news show said yesterday.

This case is just one in a series of scandals swirling within the banking system.

Earlier this month, Li Fuxiang, head of China's foreign-exchanges regulatory body, was found dead after falling from a window at Beijing's No. 304 hospital, where he was being treated for diabetes.

Officials won't reveal details, but the mystery has been heightened by reports of improprieties within the system. Hong Kong's Ming Pao newspaper has reported that Mr. Li's former boss, Zhu Xiaohua, is under investigation for "inappropriate activities" while working as chief regulator from 1993 to 1995.

In an unrelated incident, another Bank of China official was executed for fraud involving almost $1-million in bank funds.

Such revelations have been building for a few years as the Communist government attempts to clean up a financial system plagued by cronyism involving bankers, government officials and powerful business interests, to prove it is on a serious anticorruption drive.

But China's masses may not be buying the message.

The fall of Mr. Mou is being viewed with heavy doses of cynicism by ordinary people. Most think Mr. Mou, who was born a poor farmer in 1941, could not have soared to such heights without high-level connections and officials' indulgence.

"Before, we used to think he was a great man," said Mu Yan, who sells fish in Beijing. "Now we know he is a broken man who duped us all. But why did our leadership not discover this sooner? How can one man do all this alone? Who can we believe?"

Another man, standing beside Mr. Mu's tank of wriggling eels, said it wasn't possible to become a tycoon in China without an inside track.

"He had friends who were officials, I believe," said Yang, a retailer at the market. "Mou did not work alone, I'm am sure of that."

It is certainly true that Mr. Mou went out of his way to curry favour within the Communist Party.

A generation ago, he served four years in jail for writing Where is China Heading, a book criticizing Chairman Mao's brutal and destructive Cultural Revolution.

But in the days before the 1989 Tiananmen Square massacre, Mr. Mou endeared himself to the party by publicly denouncing the student protests and supporting the Communist leadership. That won him praise from The People's Daily, the Communist Party's journal of record.

At least in part because of that pro-government reputation, Mr. Mou soon had relatively easy access to millions of dollars in bank loans.

From his five-storey office, leased from the People's Liberation Army, Mr. Mou's business ideas were initially eye-catching and eventually grew bizarre.

He hit the big time in the early 1990s, when he filled more than 500 railway cars bound for Russia with pork, shoes, clothes and cheap electronic goods -- products China's state-run enterprises overproduced. He received four Tupelov 154 jets in return, which he sold to his home province's Sichuan Airlines. He made more than $20-million, wheeling and dealing that made him an instant media sensation.

From there, Mr. Mou -- who once boasted: "I like big deals" -- bought interests in commercial satellites, invested in oil fields, and asked China's President Jiang Zemin to let him blow a 50-kilometre hole in the Himalayas to bring in rain for the dry plains of China.

Such notions inevitably hit the front pages. At one point, Mr. Mou even told China's media he was planning something called Project 765, a proposal to list 13,700 of China's state-run enterprises on the New York Stock Exchange.

Such schemes aren't in his future now. As he stood in the courtroom yesterday, forlornly listening to his sentence, he said nothing.

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