Showing its teeth

Investigation into Sichuan billionaire broadens


Liu: the arrested business tycoon has been exposed as a gangland boss

Du Yuesheng remains a household name in Shanghai more than 60 years after his death. In the 1940s the drug lord’s influence in China’s financial capital extended to key government posts (see WiC176) as well as directorships in 70 companies. Du was involved in everything from finance to infrastructure to media and education.

As the city’s most influential triad boss, Du was at the epicentre of the most famous anti-graft campaign in modern China. Realising that the popularity of the Chinese Communist Party was partly a reaction to the corruption of the ruling Guomindang, Chiang Kai-shek sent his son Chiang Ching-kuo to Shanghai to conduct a clean-up mission in 1948.

In the course of the so-called “tiger-slaying campaign”, 63 leading businessmen – most of them Du’s cronies – were arrested for hoarding as well as for speculating in daily necessities. Even Du’s son was brought to trial.

Du fought back with a media campaign that revealed that the biggest hoarder of all was the Yangtze Company, then controlled by the family of Chiang Kai-shek’s wife, the Soongs. This prompted Chiang senior to send a simple telegram to his son: peace is the best option, it read.

Chiang junior soon left Shanghai and the “tiger-slaying campaign” withered. Less than a year later, the Guomindang would lose the civil war and China altogether.

Today another crackdown on a gang leader is reverberating across the country. The triad boss in question is Liu Han, a Sichuanese billionaire that we first profiled in 2010. We later went back to look at the ambitious overseas expansion of his privately-owned Hanlong Group in 2011 (see WiC125).

Until March last year Liu seemed to be making all the right moves. Then the Public Security Ministry released an unusually stern statement saying that he was being investigated for harbouring a fugitive as well as for other unspecified “serious offences” (see WiC187). The fugitive was Liu’s younger brother Liu Yong (also known as Liu Wei), whom state news agency Xinhua suggested was a “major suspect” in a triple murder.

Before his arrest Liu had been better known for his charity work than any allegations of gangland life. In particular, the public was impressed when one of the projects that he helped to fund – the Liuhan Primary School – survived the 2008 Sichuan earthquake relatively unscathed (many other schools collapsed on their faulty foundations, having been built with shoddy materials, owing to local corruption). His fugitive brother was even one of the torch runners for the Beijing Olympics.

But according to Xinhua, “Sichuan’s No.1 Philanthropist” has turned out to be a “mafia-style boss” who ran roughshod over one of China’s most populous provinces for nearly two decades. The accounts of the case published by the newspaper revealed that prosecutors have charged Liu and 35 of his gangsters with 21 crimes that include the murder of nine people.

“With blood, Liu cleared his path to riches,” Xinhua said, depicting him as a merciless acquirer of his personal fortune of Rmb40 billion ($6.6 billion). Liu’s gang is said to have confronted any local residents or business competitors standing in his way. Those who didn’t submit faced intimidation, injury and worse.

Another gangster told Xinhua about the way Hanlong won a bid for one lucrative mining project. As the other interested parties entered the auction room, they were told: “This is Brother Yong’s [Liu Yong] project. Whoever dares to raise his hand once will have an arm chopped off. Whoever raises his hand twice will get a bullet,” the rival mobster recalls.

But how could a businessman become so powerful? The People’s Daily offered a careful explanation. Liu wouldn’t have been successful for so long if he hadn’t enjoyed the protection of “certain Party, government and legal bodies,” the newspaper suggested. Authorities say that they are now determined to hunt down those who sheltered his syndicate. “No matter who you are or what your position is, if you break the law you will be punished by the law,” the People’s Daily warned.

In fact, Liu was one of several tycoons arrested in Sichuan province early last year. The purge also netted several associates of China’s former head of security, Zhou Yongkang, who served as the province’s top official from 1999 to 2002, before being promoted to the Party’s ruling Politburo Standing Committee.

In late 2013, several senior officials working in the state oil sector – where Zhou spent another 30 years of his career – were also arrested (see WiC207).

Now the purge has extended to members of China’s police and intelligence bodies. Former vice-minister of public security Li Dongsheng was placed under investigation this week and the New York Times reported last week that Liang Ke, the director of the Beijing Municipal Bureau of State Security, was taken into custody last month.

The flood of investigations and arrests has fuelled speculation that Zhou himself could be the next target in the anti-graft drive of President Xi Jinping, who has vowed to crack down on “tigers and flies” alike (meaning senior and junior offenders).

Chinese media has stopped short of connecting Liu Han’s case with Zhou directly.

However, there has been more coverage of another businessman called Zhou Bin, who is rumoured to be Zhou’s elder son. Century Weekly also reported this week that Zhou Bin was a close business partner of Liu Han’s.

The Hong Kong Economic Journal went furthest, noting that all of Zhou senior’s closest allies in the oil sector, in Sichuan province and in the government security bodies are being taken down one-by-one.

“These signals suggest it is highly likely that Zhou will soon be put under official investigation or even into detention,” the newspaper said.

If that’s true, Zhou must be hoping that the “tiger slaying” campaign in Sichuan is soon called to a halt, like the one in Shanghai in 1948.

© ChinTell Ltd. All rights reserved.

Sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.