Zhou Zhengyi Has Lost His Best Friend

When Zhou Zhengyi went to prison in Shanghai in 2004, he was

treated like a king – lavish meals, the use of his mobile phone so that he

could run his business and a year off his sentence.

Once the richest man in China’s richest city, the stock and property tycoon

benefited from his close relationship with the Communist Party chief of Shanghai and the

50,000-yuan bribe that he had given the prison governor. He was released last

May and imprudently resumed his business career instead of leaving the country.

On January 20, Zhou was rearrested and this

time he is likely to get life imprisonment or the death sentence. The

difference is that he has lost his patron ‑ Chen Liangyu, the party chief, was

fired last September over allegations of looting Shanghai’s social security fund.

Zhou’s story is emblematic of how the

fortunes of private businessmen are closely linked to the officials who back

them in the new China

as well as the old. To obtain land, permits and business licences, they have to

bribe officials. The risk is that if the official is arrested these bribes will

become part of the investigation and they will go down along with him. As the

saying goes: “when a man becomes an official, even his chickens go to heaven.”

The chickens in this case were delivered up

by what became known as the Shanghai Gang, the powerful clique of individuals

headed by Jiang Zemin, the onetime Shanghai

mayor who rose to rule China

in the 1990s and then took his clique with him into the politburo. Chen Liangyu

was one of them. Jiang left office in 2003 as president before giving up his

final post as chairman of the Military Commission in 2004.

However, the ascendancy of President Hu

Jintao and Premier Wen Jiabao kicked off what has been described as a

slow-motion purge that would ultimately claim Chen and other provincial leaders

who have also faced dismissal or jail. There

are increasing reports that Hu may even be going after Jiang Zemin’s children.

Zhou Zhengyi is collateral damage. His is a

rags-to-riches-to-rags story typical of many nouveau riche in China who

fought their way out of dismal poverty to wealth and power. He was born in 1961

into a poor family with seven children in Yangpu, an industrial district of

Shanghai. After graduating from secondary school, he took a job as a

book-keeper in his father’s factory.

Unhappy with this, he left and opened a

cigarette shop and bought and sold foreign exchange on the street. In 1986, he

went on a student visa to Japan.

He did not study but worked hard at menial jobs, earning 500,000 yuan during

three years.

On his return to Shanghai, he opened a restaurant and sauna

and karaoke club. He acquired his first fortune through purchasing shares in

state companies from workers who had been given them. Uncertain what they were

worth, the workers were happy to sell them to Zhou, who waited until the shares

were listed and rose sharply and then sold them for a handsome profit. He also

traded extensively on his own account in the Shanghai

and Hong Kong stock markets.

By now, he had become famous in Shanghai. He bought a

large villa in the west of the city where he held weekly parties for the rich

and famous. Zhou spent heavily on fine clothes and designer goods and enjoyed

the company of film actresses.

In 1994, he opened another restaurant in a

downtown location, which became an important social center. There he met and

befriended Chen Liangjun, the brother of the party chief. The younger Chen got

free meals whenever he ate at the restaurant. Another of the regulars was Liu

Jinbao, the head of the Bank of China in Shanghai,

who also became a close friend.

At the end of 1997, Zhou set up a company

called Nongkai Development as a vehicle to enter the most profitable business

sector in Shanghai,

property. The last 15 years in Shanghai

have witnessed one of the largest peacetime urban migrations in history, with

the demolition of tens of thousands of old houses in the city centre and the

relocation of their residents to apartment blocks in the suburbs. Developers

who could obtain plots in central locations and redevelop them into hotels,

office and high-class housing stood to make a fortune.

For the years of 2001 and 2002, the city

government designated 307 sites for such re-development, with a total area of

13.5 million square feet. The most desirable of these was Dong Ba Kai (East

Eight Pieces), with 269,000 square metres and 12,000 homes, a prime site in the

city centre. Despite the official promise of an auction, Zhou succeeded in

acquiring the site in June 2002, using none of his money but loans from banks,

which were queuing up to lend to him as a favourite of the party chief.

Zhou gave Chen’s brother 10,000 shares in

his Nongkai firm and made him one of its senior managers. Zhou was at the apex

of his wealth and influence. A Forbes survey of the rich in 2002 ranked him the

wealthiest man in Shanghai and the 11th wealthiest in China, with a personal

fortune of US$320 million – although being named to the Forbes Survey usually

sends chills down the necks of Chinese tycoons because it attracts the

attention of authorities in Beijing. By

that time, Zhou controlled four listed companies, two in Hong Kong and two in Shanghai, with 4,000

employees and group sales of US$540 million in 2002. He bought a luxury house

on Victoria Peak

in Hong Kong and was often photographed with

his glamorous wife, Sandy Mo, also known as Mo Yuk-ping, buying luxury goods in

Central.

For Zhou, the Dong Ba Kai deal proved to be

a step too far. Six residents in Dong Ba Kai, aided by lawyer Zheng Engchong,

charged that Zhou had illegally acquired the site and on May 28 that year took

him and the district government to court. They lost the case but sent a

petition to Beijing,

protesting the circumstances of the acquisition and treatment of the site’s

residents.

Enraged at this challenge to his authority,

Chen had Zheng Enchong arrested and sentenced in October 2003 to three years in

prison ‘for illegally providing state secrets to entities outside China’.

Zheng had sent two documents to an NGO, Human Rights in China.

Alarmed at the possible social unrest, Beijing demanded action

against Zhou. Chen limited the charges to one of stock market fraud, for which

he received a three-year sentence in June, 2004. Chen ordered the best treatment for Zhou in

prison, assisted by a gift of 50,000 yuan to the prison governor. Zhou’s meals

consisted of four dishes and a soup and he was given unlimited access to his

mobile telephone, enabling him to contact family and associates and continue to

run his business. In the meantime, his wife, Mo, the general manager of Zhou’s Shanghai Land,

was charged in Hong Kong with 23 counts of conspiracy to defraud and was jailed

for three years in Hong Kong.

Zhou was released in May 2006 after serving

only two years, and looked forward to resuming control over his business

empire. But on September 25, his patron, Chen, was dismissed and put under

investigation for corruption. Chen is said to have a stock portfolio of 300

million yuan, of shares given to him by state companies and business people.

Suddenly, Zhou had become a target in Beijing’s campaign against Chen and the Shanghai faction as one of the biggest donors

of bribes to him. On January 20, Zhou was arrested and charged with giving

bribes and falsifying tax invoices. Mo remains in jail in Hong

Kong.

At that, she is in considerably better

shape than her husband. In Communist China, party officials usually receive

lighter sentences than ordinary people for the same offence. But in its desire

to make an example by killing the chicken to frighten the monkey, as the

proverb goes, Beijing

may decide to execute Zhou. The chickens appear to have fallen from heaven.