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Sobering times for China's rich and famous
From CNN Correspondent Lian Pek
HONG KONG, China (CNN) -- Once the success stories of a booming Chinese economy, those who appear too successful are now feeling the heat. From businessmen to high-profile chiefs of state-owned firms, no one is being spared the sweep of China's anti-corruption campaign. Take Liu Xiao Qing for instance. Once the queen of Chinese cinema in the 1980s, she is now the poster girl for the campaign after the actress turned businesswoman was arrested last month for tax evasion. Earlier this month, orchid and property magnate Yang Bing -- the newly appointed governor of North Korea's Special Economic Zone -- was also detained for evading taxes. The 39-year-old Yang, a Dutch citizen born in China and reported by Forbes to be the country's second richest man, has admitted to owing U.S.$1.2 million in back taxes in Shenyang province. (Yang's arrest) Fall from graceNow, authorities are looking for China's third richest man, Yang Rong, who is reportedly hiding in the United States. Founder and former CEO of Brilliance China Automotive Ltd., the country's largest minibus-maker, Yang Rong is also suspected of committing economic crimes. Yang Rong, believed to have amassed a personal wealth of U.S.$840 million and ranked China's third richest man by Forbes, has protested his innocence. He claims he was not involved in any economic crimes or tax evasion. He told Hong Kong media last week that the Liaoning government accuses him of fleeing with 600 million yuan (U.S.$72.5 million) in state assets. ('I'm innocent') "There's a lot of discontent at the grassroots level," says Fred Hu, Executive Director of Goldman Sachs. "When people are losing their jobs and at the same time see people in power positions being corrupt, they are very angry. By targeting the rich, famous and the powerful, the government is trying to send the message that they are fair, no one is above the law." And that includes government officials like Wang Xue Bing. A protégé of Premier Zhu Rongji, the former Bank of China president was sacked in January over questionable loans during his New York tenure. In another case, former China Everbright Group chief Zhu Xiaohua, also a Zhu Rongji protégé, was convicted of bribery and sentenced to 15 years in jail earlier this month. There is little surprise that much has been made of the falls from grace. "Especially ahead of the National People Congress [beginning November 7] with power structure changes -- who's in, who's out and what scores are being settled -- some of the recent scandals have raised the question: whether someone is being prosecuted because it was a sign of a loss of some power or potential loss of power by a particular faction in the government?" says South China Brokerage director Howard Gorges. A big stick
Whatever the motivation, analysts say one message is clear. These arrests are meant to show foreign investors that the Chinese government does carry a big stick and it is establishing a rule of law any respectable member of the World Trade Organization will be proud of. Whether anyone buys it is another question. "I think it probably gives a reasonably good impression but for those that have been following China closely for a number of years, I think they'll realize that this is a record that gets repeated every year or two and the same problems always emerge and the same amounts of money or even larger sums of money seem to get lost or disappear," Gorges tells CNN. In the meantime though, there is a downside to making examples out of those who've allegedly prospered dishonestly. The bad press could give fledgling entrepreneurs a bad name they don't necessarily deserve. "These people not only are undermining their own career, their own business interests, but they also could tarnish the image and reputation of the whole emerging entrepreneurial class. Who will be the backbone of the Chinese economy," asks Fred Hu. But if corruption is the lubricant that oils the wheels of commerce, getting people to come clean in a country making the leap into the free market, won't be easy. "You can't just get people to suddenly discover integrity overnight," says Gorges.
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