Rich and (in)famous
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07/10/2003
Until recently, Zhou Zhengyi was considered Shanghai's richest resident. Ranked number 11 on Forbes' annual list of China's wealthiest people last year, the chairman of the Hong Kong-listed Shanghai Land and Nongkai Development (Group) Co slipped from his pedestal on May 26 when he was put under house arrest amidst a swirl of allegations concerning financial irregularities such as improper bank loans, the fabrication of commercial bills, and fraudulent accounting practices. Shanghai authorities are investigating the case and it is expected that Zhou will soon be charged. Meanwhile, in the northeastern city of Shenyang, capital of Liaoning Province, a celebrity-style trial started on June 11 and the court's ruling is still pending. The accused, Yang Bin, once the second richest person in the country by Forbes' estimation, has been under arrest since October 2002. The CEO of Euro-Asia Group faces charges involving fraudulent investment schemes and contracts, bribery, and the illegal occupancy of farm lands. Early last year, China's best-known movie star was detained for tax evasion. Liu Xiaoqing, proprietor of numerous businesses ranging from television production and advertising to real estate and myriad other areas, has emerged as the Chinese equivalent of Leona Helmsley. Reports say that she owes 14.6 million yuan (US$1.76 million) in taxes. Although her trial has not yet started, her arrest has already spurred a rush by the rest of the country's top entertainers to pay up in haste. Mou Qizhong was arrested in 1999 and ultimately received a life sentence for foreign exchange fraud in May 2002. The former chairman of Land Economic Group claimed to be the richest person in the country at one time. However, a satellite business was caught in a credit crunch in 1995 when the monetary policy was tightened to fight inflation. To keep the credit flowing, he falsified import documents to defraud the Bank of China of US$75 million in foreign exchange credit. While these high-profile cases involve some of the country's richest, most famous magnates, there are many more business scandals that are less conspicuous but no less egregious in nature. Even though the cases are unrelated, they seem to denote an emerging trend, prompting people around the country to ask: Why do so many of the super-rich turn out to be crooks? Are they the exception or the rule? Is there something in their personalities that drives them to acquire incredible wealth or bend the rules however they like with no sense of accountability? More importantly, does one have to be a crook to be filthy rich? Murky money China's rich stand out not only for the amount of wealth they accumulate, but also for the lightning-fast speed at which they accrue it. In 1994, Zhou Zhengyi owned one restaurant in Shanghai - by 2002, he was said to be worth US$320 million. Yang Bin was apparently penniless when, as a student, he went to the Netherlands in the 1980s, but by 2001 he was worth a cool 4 billion yuan (US$483 million). The details of many of these tycoons' get-rich-quick stories remain a riddle to the public. The actual rise to success is often passed over by reporters who describe their spendthrift lifestyles in minutiae yet rarely ask tough questions about how they made their fortunes. When an investigation revealed that Liu Xiaoqing, the self-claimed billionaire movie-queen-turned-businesswoman, actually had only about 10 million yuan (US$1.2 million) in assets, people were stunned. Previously, whenever she defaulted on debt payments, she would say, "I'm the 45th richest person in the mainland, so there's no way I can run into financial trouble." Zhou Zhengyi has suggested that his net worth was underestimated by Forbes. "There's so much money chasing me that I hardly have time to look at it and say 'yes'," he told the press. Yang Bin was equally dissatisfied with the first runner-up title, feeling he should have taken the top spot because that position was held by a pair of brothers. What makes them tout their wealth so relentlessly and shamelessly? Do they regard it as a badge of honour or is it merely a form of ego gratification? According to media reports, one of the Forbes' certified mega-rich disclosed that "the greatest wealth is to be counted as one of the super wealthy because that is the secret key to getting vast amounts of wealth to actually materialize". Russell Flannery, the new list-compiler for Forbes, maintains that, contrary to the popular belief that China's affluent are avoiding him for fear of alerting tax authorities, they are in fact more than willing to talk to him. Being on the list helps them with their overseas business expansion, he said. Cao Jinqing, a professor with the East China University of Science and Technology, expressed amazement at the seemingly overnight accumulation of vast fortunes by some individuals. The same feat, he said, "would have taken 100 years or more for people in capitalist countries in the early years of growth" to accomplish. Swept away by the current Not everyone gets rich by shady means. Mou Qizhong made his fortune in 1992 when he traded 500 railroad cars filled with cheap, surplus Chinese textiles, electronic goods and pork for four Russian passenger jets, which he then sold to a small Chinese airline for a tidy profit of US$11 million. Equally well documented is the story of Lai Changxing, who was just as intrepid but on the opposite side of the law completely. He formed the largest smuggling ring in China's history by buying off dozens of officials to pave the way. However, experts caution against placing all the blame on individuals. "It's bound to happen if you have a twisted economic system," declared Wei Jie, a professor with Tsinghua Business School, who added that this was not to imply that there was any fundamental problem with the market reforms and private businesses. Zhao Min, CEO of Sinotrust Management Consulting, asserts that industries with extremely high profits but inadequate management guidelines tend to give rise to these "shooting star" business leaders. "It's got to be the system. When someone does something and goes unpunished, everyone gets the impression that it's okay to do it," he analyzed. Zhao paraphrased the famous analogy used by Deng Xiaoping, the architect of China's ongoing economic reforms: "When you cross the river by clinging to the rocks, you can save time. But some of the people will invariably be swept away by the currents. Only those who have good swimming skills and know the river will get to the other side. You can blame the drowned for being reckless, but this way of crossing the river is inherently fraught with risks. We have come to the point when we need to build a bridge so that people from now on can cross the river safely." Business commentator Zhao Xiao, meanwhile, used another analogy to describe the pervasive legal troubles of China's fabulously wealthy. "When the sky is pouring down coloured rain, it is useless to wear a white shirt." Bold, brash...and broken Public opinion seems to support the belief that most of the super-rich must have made their fortunes under the table. They call it "the original sin". The difference, they say, is that some people wash their hands of such practices once they've found their first pot of gold while others continue replicating the same schemes until the law steps in. "There are unspoken rules even in our system's imperfections. I call them 'business ethics' and I abide by them," affirmed Guo Fansheng, CEO of HC International Information, who said he had never bribed officials when bidding for government projects. "I used to be a scholar, so I tend to be a little conservative." But most of the supremely wealthy are anything but risk-averse. They venture into uncharted territories by breaking rules, not by toeing the party line. And there's definitely something in their make-up that fires their passion for taking chances. Some call it "flamboyance". What they have in common are super-sized dreams, with super-sized egos to match. It seems evident that their success has something to do with pomposity. Unfortunately, many do not seem familiar with the concept of "calculated risk". "They often don't have much moral fibre or even a proper education to back up their bravado. When they bribe officials on one side and bankers on the other, they think they have formed a golden triangle to ensure everlasting wealth. And some took this game of corruption to Hong Kong, where the system has fewer cracks. I can't deny that they are geniuses, but twisted ones nonetheless," said Shao Daosheng, a researcher with the China Academy of Social Sciences. Shao added that as anti-corruption campaigns become more serious and the market systems are perfected, more people who do not deserve their ill-gotten wealth will fall from grace. In his appeal for help after his trial, it is said that Mou Qizhong wrote to the Communist Party Central Committee: "What the steel and oil barons of the West did at the start of the 20th century, Mou Qizhong of the East can do better at the start of the 21st century." He may have had the chutzpah, but he did not possess the skill. (HK Edition 07/10/2003 page1)
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