In 2002, Forbes magazine listed 41-year-old Chinese property developer Zhou Zhengyi as the 11th richest man in China. In a population of 1.3 billion, that made him richer than 1,299,999,989 other Chinese people. That was pretty good going for the Shanghai-born Zhou, whose start in business came in 1978 as the teenage owner of a wonton noodle restaurant in the Yangpu district of the city. To put it in perspective, the purchasing power of his millions is worth around 10 times the amount in China itself, making the sheer scale of Zhou’s achievement much more remarkable than most Western rags-to-riches story. And when you add into the mix that it was created under the all-powerful glare of the omnipotent Communist party, it is all the more incredible still – especially in a society that promotes community spirit and acting for the good of all. His entrepreneurial tendencies would normally have been crushed at birth.
But of course, times are changing in China. Zhou’s meteoric rise to prominence in China, and particularly Shanghai, was phenomenal, and the name ‘Zhou’ was generally prefaced with the words ‘flamboyant’ and ‘entrepreneur’. He was young, smart, successful and wealthy, was part of the jet-set of Shanghai elites – and he had a beautiful wife. Then in 2008, he was sentenced to 16 years in prison for bribery and embezzlement.
It was a case that went to the very top of the Communist Chinese government and led to the dismissal of Shanghai’s Communist Party chief Chen Liangyu. And while no one is disputing the extraordinary rise of China, the case of Zhou Zhengyi exposed the corruption that is one of the problems at the root of the country’s phenomenal growth.
Shanghai has been in existence for more than 1,000 years, and its location at the mouth of the Yangtze River, roughly equidistant from Beijing and Hong Kong, means it has long been an important trading crossroads. Today, Shanghai is the largest city in China in terms of population and one of the largest metropolitan areas in the world, home to more than 21 million people. From being the largest economic and transportation centre in China – in 2005 it became the world’s largest cargo port – Shanghai is now busy striving to turn itself into one of the world’s greatest economic, financial, trade and transportation hubs.
Its economic importance to China has long given Shanghai big political clout. The Chinese Communist Party was formed in Shanghai in 1921, while Mao Zedong, the first chairman of the Communist Party of China, cast the first stone of the Cultural Revolution in the city by publishing political rhetoric he had been unable to get published in Beijing. Even today, those in Shanghai’s top jobs, such as the party chief and the position of mayor, are always prominent on a national scale. Indeed, four secretaries of the municipal Party committee, or mayors from Shanghai, eventually went on to take prominent central government positions, including former president Jiang Zemin, former premier Zhu Rongji, and current vice president Xi Jinping.
Over the past 20 years Shanghai has expanded sixfold, an incredible rate but one that has come at a cost. The huge road-expansion plans conceived in the 1980s predicted that Shanghai would top 2 million cars in 2020 – a figure it surpassed in 2004. And while it boasts more skyscrapers than New York, the city’s building practices, in terms of style, quality and dubious town planning decisions, leave much to be desired. In June 2009, a just-completed 13-storey block of flats collapsed, raising fresh questions about corruption and shoddy practices in China’s construction industry. While it is easy to point fingers, no nation is innocent when it comes to corruption and political interference, especially in the so-called advanced West. And of course, corruption or not, the Chinese growth miracle has taken hundreds of millions out of poverty.
Into this rapidly expanding world of opportunities was born Zhou Zhengyi (also, confusingly for Western readers, known as Chau Ching-ngai). One of seven children, he was born into a tough, waterfront area of Shanghai by the Huangpu River. Zhou dropped out of secondary school to open a noodle bar, and went on to open two smarter restaurants in the city, a karaoke bar and a sauna. But Zhou saw the impending building boom all around him and was soon investing his profits in a building materials business. Despite communism, China still managed to nurture a culture of entrepreneurship. By the early 1990s Zhou was trading in copper futures and other commodities on the London and Shanghai exchanges. But the big bucks were in property in Shanghai, where land was controlled by the state and private developers were clamouring to cash in on the government’s economic reforms. And Zhou, who counted Chen Liangjun, the brother of the former Shanghai party secretary, as an associate, soon did exactly that.
Zhou’s ability to harness the communist political infrastructure to further his own entrepreneurial ends was impressive. And all this in a country where there is a tangible reverence and a general desire to ‘fit in’ and not to rock the boat. Zhou’s property dealings saw him amass a US$320 million fortune – enormous by normal Chinese standards. But that was not made through simply working hard and being nice to his employees. As the friendship with Chen Liangjun highlights, it is not just hard work that gets you to the top in China – it is who you know. And Zhou knew a lot of people.
His trouble started, though, when demolition men banged on the doors of some old apartment buildings in the prime West Beijing Road area of Shanghai. The 2,159 residents had little alternative but to move out, but they did not go quietly. Residents claimed they had received inadequate compensation (as little as £10,000 each in a city where properties cost a small fortune) and had suffered violent intimidation. Lawyer Zheng Enchong agreed to act for them and, on 28 May 2003, at the Jingan District People’s Court in Shanghai, the case opened.
The lawsuit was from six homeowners representing 2,159 original residents. The plaintiffs claimed that the Jingan District Property Development Bureau, under the instructions of the district government, improperly allowed a company controlled by Zhou to redevelop the 43,000 square metre property without paying a land lease with an estimated value of US$36.3 million. The case did not go well. Eight days after bringing the action, the lawyer was arrested, charged with ‘disclosing state secrets’ and sentenced to three years in jail! As for the case, it was dismissed. But the residents were not having it. Outraged, they took their grievances to party leaders in Beijing. The result of such militancy: 85 of them were arrested as they tried to deliver a petition.
Yet while the Beijing authorities clamped down on these particular Shanghai residents, they were obviously becoming increasingly exasperated with the likes of Zhou and the so-called ‘Shanghai faction’. Soon after the West Beijing Road affair, Zhou was charged and found guilty of stock market fraud and falsifying registered capital reports. He was arrested in connection with a Y2 billion (US$242 million, or £132 million) loan he obtained from the Bank of China for his unlisted property company, New Nongkai Global Investments. It was a case that was to have repercussions, not least for the bank, the fifth-largest in China. It turned out that the Bank of China had failed to follow proper procedures in making various loans to Zhou: one was granted on the same day as the application, without the pledging of any security, something unheard of for ordinary Chinese people.
The vice-chairman and chief executive of Bank of China (Hong Kong), Liu Jinbao, was duly arrested and charged with bribery among other things. He has not been seen since. There were also shady goings-on at Zhou’s Shanghai Land business, involving him and his glamorous wife Sandy Mo (also known as Mao Yuping or Mo Yuk-ping). She was arrested and charged for defrauding five banks of HK$89 million using bogus letters of credit. Although she denied the charges, she got a three-year prison sentence.
Yet while Western readers may think Zhou’s three-year detention is punishment enough, the length of his sentence was met with incredulity from sections of Chinese society. In a country where the death sentence is routinely meted out in corruption cases, Zhou got off very lightly indeed, leading to talk of a plea bargain – and of friends in high places. According to Amnesty International, China carried out more executions than the rest of the world put together in 2008. Even on percentage terms, it rates higher than the United States, itself not averse to the practice. Since 1 January 2007 China has required the Supreme Court to review all death sentences, although the exact number of people executed is classified as a state secret. The death penalty still applies to 60 offences in China, including non-violent crimes such as tax fraud and embezzlement – meaning the likes of Zhou must have been confident in their connections.
That said, the Chinese state is conscious of outside pressures on the subject, and in July 2009 Zhang Jun, vice-president of the Supreme People’s Court, said the court would in future impose more ‘suspended death sentences’. Other gossip relating to Zhou’s case touched on the politics at work and the power struggles between Hu Jintao (the current general secretary of the Communist Party of China), Wen Jiabao (the current premier of the People’s Republic of China) and the Shanghai faction headed by former president Jiang Zemin.
Zhou was a friend of the so-called ‘princelings’, or children of the powerful Shanghai faction, but these relationships meant he was on the other side to Hu and Wen. Imprisoning Zhou was seen by many as Hu and Wen’s way of taking the Shanghai faction down a notch. And it would not be the last time.
Zhou’s lenient sentence was not a lesson to him. Soon after his release in 2006 he was arrested again for his involvement in a property scandal that misappropriated millions of dollars from Shanghai’s social security fund. This time, the scandal went to the very top of the Shanghai elite – and the powers that be in Beijing decided they had had enough. Heads would roll. The investigation uncovered a complex web of corruption, bribery and embezzlement that reached every corner of business and politics in Shanghai.
Among those who stood trial were Ling Baoheng, Shanghai’s former chief watchdog of state-owned assets. He was charged with taking bribes totalling Y500,000. Other people involved included highway tycoon Liu Genshan, Wu Hongmei, former deputy director of the Shanghai Municipal State-owned Assets Supervision and Administration Commission, and Yin Guoyuan, former deputy director of Shanghai Housing, Land and Resources Administration.
By far the biggest scalp was Chen Liangyu, who sat on the 24-man ruling politburo as well as running China’s largest city. Hundreds of millions of pounds had been siphoned out of the city’s pension fund, and Chen was accused of cronyism, covering up offences by staff, and nepotism. For someone of Chen’s standing to face legal trouble is exceedingly rare in China, even if the authorities have evidence of corrupt activities by them or people close to them. Actions like these do not happen unless they are sanctioned from the very top. President Hu Jintao wanted it known that he was prepared to crack down on graft – particularly if his political opponents are involved.
Again it was part of a broader political tussle about control of the Communist Party and the government. The message was that Beijing is very much in control, and that it would not put up with the likes of Chen and Zhou doing what they wanted.
Yet for Zhou, old habits die hard. In addition to the embezzlement charges, Zhou was charged with bribing prison authorities to gain special privileges, including conducting business meetings and making phone calls from prison. Incredibly, Yu Jinbao, a supervisor in the Shanghai Tilanqiao prison, was sentenced to two years in prison for writing more than 200 letters to try to get Zhou’s sentence commuted! Others were done for accepting gifts from ‘Zhou’s people’. In a neat conclusion to that part of Zhou’s story, four of his jailers were eventually jailed for corruption.
Zhou’s story shows how success can be dangerous game in China. Intertwined with politics, power games, a disregard for the law, nepotism, bribery and corruption, it is an issue that the authorities realize could continue to be a serious problem in the future.
Zhou’s case smacks of a certain arrogance, brought about by such amazing success from an early age. It was not that Zhou thought he was untouchable because of who he was (after all, he was a nobody, really). It was more than he felt untouchable because of his achievements and wealth. It is a self-belief bordering on delusion. Zhou’s greatest mistake was not realizing that the wind in China can quickly change direction.
SOURCES
Amnesty International
BBC, 1 June 2004
Bloomberg, 29 November 2007
Business Week, January 2009
China Daily, 23 December 2004
China Daily, 11 August 2007
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Daily Telegraph, 26 September 2006
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Guardian, 25 September 2006
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