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China tycoon probe takes political turn in Shanghai
2003-06-08
SHANGHAI - It began with a protest by displaced Shanghai residents and escalated into a probe of suspicious loans. Now it threatens to balloon into the biggest scandal to rock China's financial hub.The uproar surrounding tycoon Zhou Zhengyi and millions of dollars in alleged suspect loans furthers an official fight against corruption, but experts say it is also taking on a distinct political dimension. Some say it could be partly an indirect campaign against the so-called Shanghai Gang of politicians connected to former President Jiang Zemin, still a key figure despite handing over most of his power to a new generation in March. They say it could put pressure on Huang Ju, now on the Communist Party's all-powerful Politburo Standing Committee, and Shanghai party boss Chen Liangyu -- just because they are part of the group. "The case is very political," said Jean-Pierre Cabestan, director of the French Centre for Research on Contemporary China. "I'm sure there'll be pressure within the system to include Huang Ju and Chen Liangyu in the investigation." Zhou, a flamboyant wheeler-dealer ranked China's 11th-richest man in 2002 by Forbes magazine, is under house arrest and being investigated for questionable loans and fraud, state-owned newspapers say. HOW HIGH? Homeowners representing more than 2,000 residents have filed a lawsuit alleging they were evicted wrongfully to make way for one of Zhou's centrepiece developments on land they allege he got free from the city. Hong Kong is probing deals involving two of his Hong Kong-listed firms, Shanghai Merchants (1104.HK) and Shanghai Land (0067.HK). "I guarantee you that there's going to be that speculation: where will they stop the net? How high will they allow fingers to be pointed?" asked Bob Broadfoot, a China expert with the Political and Economic Risk Consultancy in Hong Kong. "Whenever you have any scandal, there's always somebody that asks those questions. Sometimes they're right." Political manoeuvring hit a peak in the run-up to the Party Congress last November when Jiang used his clout to stack the Politburo with allies -- collectively known as the Shanghai Gang. Official newspapers based in Beijing link the colourful tycoon to questionable loans from the Bank of China, one of the country's four largest, and hint at an all too cosy relationship between tycoons and bankers. "These rich people might not even be able to feed their dogs if they didn't have support from bank loans," sniffed the Beijing-based Financial Times. The Chinese Securities Journal attacked a listed firm linked to Zhou for its lack of transparency, saying trying to figure out who owned it was like "looking for flowers in the fog." If nothing else, some in Beijing might be using the case to exert their authority on China's rapidly developing business hub and cut it down to size, experts said. "This might be a good occasion to put a bit of pressure on Shanghai and remind Shanghai they have to do things according to the rules," said the Hong Kong-based Cabestan. Still, experts do not expect the case to have a lasting impact on business confidence in the regional commerce, shipping and industrial powerhouse. "This is an isolated case. It's hard to think business confidence in Shanghai will be adversely affected because of this one incident," said Peter So, ING Barings' China research head. Reuters
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