Quotes of the Day
A few days before the Sept. 2000 grand opening of a replica of Amsterdam's railway station at his Holland Village property development in the Chinese rust-belt city of Shenyang, agri-business tycoon Yang Bin decided he wanted the large greenhouses nearby filled with flora so visitors would get the impression the project was on track. Yang's farm experts protested there was no way to grow the requested tulip and orchid plants that quickly. Undeterred, Yang went out and bought them from local farmers, replanted them in the greenhouses and passed them off as his own. "If you work for a guy like this," says one of Yang's managers, "he pulls you from one surprise to the next."
It was Yang's turn to be ambushed on Oct. 4, when the 39-year-old entrepreneur—who recently was chosen by North Korean dictator Kim Jong Il to run a special free-trade zone on the Chinese border—was escorted from his Shenyang home by police. Chinese authorities aren't saying why he is being held under "house supervision" or what crimes they think were committed. "Yang Bin and his enterprises in China are suspected of being involved in various illegal activities in China," Zhang Qiyue, China's foreign ministry spokeswoman, said last week without elaboration. Speculation ranges from tax evasion to corruption arising from Yang's cozy ties to provincial officials.
Whether Yang's Euro-Asia Agricultural (Holdings) has sinned remains unclear. But the company, which grows orchids and sells flower seedlings, is certainly being punished. Trading in Hong Kong-listed Euro-Asia Agricultural (Holdings) shares has been suspended since Sept. 30; the stock price had plummeted 86% since May, to less than $0.05. Since Yang's arrest, the company looks very much like it is imploding. Four top officials, including the vice-chairman, resigned in the last two weeks citing "personal reasons," according to company statements. The chief executive officer stepped down in September. The company also disclosed that a creditor demanded the repayment of a $3.8-million line of credit by Oct. 16, and Euro-Asia is negotiating a new repayment schedule. Apparently desperate for money, Yang, still Euro-Asia's chairman, has been furiously selling his shares in the company—first in a chunk to two private investors in August, and then on the market in late September—whittling his stake in the company to 49% from 72%.
More bad news could be coming. According to a press report, China's securities regulators sent a letter to their Hong Kong counterparts in late September alleging that Euro-Asia may have inflated its revenues. Neither regulatory body would confirm that such a letter was sent. (A company spokesman didn't return phone calls seeking comment.)
Ask Yang's acquaintances and local business people in Shenyang if they are surprised by his current woes, and the answer is an emphatic "No." The cause of his fall, they claim, is most likely Holland Village, his 220-hectare re-creation of a Dutch city on the outskirts of Shenyang. Yang, who carries a Dutch passport, got hooked on Holland while studying at Leiden University there. The partly-finished development looks like a dystopian Disney World. Within its gates, which are flanked by massive golden lions, are the offices of Yang's local empire, some of which are housed in a replica of the Hague's International Court of Justice. In various stages of construction are vacation villas, apartment towers, shopping districts and a theme park. But the project, which Yang has reportedly invested about $220 million in, appears to have run out of steam. A wide avenue is lined with half-finished copies of Amsterdam canal houses, hollow shells already showing signs of wear. A few workers trundle down the street pulling wheelbarrows, but otherwise the place is deserted. Red-brick housing blocks hold 1,400 apartments—all vacant. Liu Ping of the Netherlands Business Support Office in Shenyang says: "A lot of people wonder whether (Yang) will be able to pay off his loans."
Questions are also being raised about the way Yang secured land for the project. In July, the Guangzhou-based newspaper Southern Weekend published a story suggesting that Yang got the go-ahead to break ground at Holland Village under false pretenses. The article said the business plan submitted to Shenyang authorities called for high-tech farming and tourism, and Yang paid a much lower price for the land than if he'd declared he intended to use it for home construction. Says a manager at one of Yang's Shenyang companies: "As far as I know, building apartments was never part of the original plan. I left town for a few weeks, and when I returned, all of a sudden Holland Village had become a real estate development."
As Euro-Asia is raked through the muck, the concern now is that other listed private Chinese companies will be splattered. A UBS Warburg index of 20 of these so-called "private chips" has fallen 10% since it was inaugurated in January 2001. That's far less than the 45% fall of Hong Kong's benchmark Hang Seng Index. But p-chips plunged three percentage points since the Yang scandal broke. Because of the lack of transparency and secrecy among Mainland companies, "it is quite difficult to sort out which are the reliable ones and which are the crooks," says Willis Ting, executive director of Tai Fook Capital, a Hong Kong merchant bank.
Indeed, other p-chips have suffered similar problems. Shares of Greencool Technology Holdings Ltd., a Hong Kong-based refrigerant seller founded in 1998, have tumbled 77% since July on the Hong Kong Stock Exchange amid a string of vague rumors of corporate misconduct. In July, the company had to fight off a Chinese media report which claimed its financial statements were unreliable. At the time, Greencool said that certain parts of the report were untrue, but didn't elaborate. In March, the Hong Kong Stock Exchange questioned the company about a large advance payment made to its sole supplier, controlled by Greencool chairman and founder Gu Chu-jun. Regulators wanted to know "whether the transactions were conducted on normal commercial terms," according to a company statement. No action has been taken, although a spokeswoman for the Hong Kong exchange says it is "still reserving the right to take action." In a statement, the company asserts that the payment was made in its usual course of business.
A spokesperson for Greencool didn't return phone calls seeking comment—standard operating procedure in a country where "the less said, the better" could be the corporate motto at most organizations. Ultimately, Yang may have contributed to his own downfall simply by flying too high and speaking too much. When Forbes magazine named Yang the second-richest man in China with a $900-million fortune, he lined up his cars, including a Rolls-Royce and two Mercedes limousines, so that Chinese papers could photograph them. "This is a town where, if you make a lot of money, you keep your head down," says an American businessman and long-term Shenyang resident. That's especially true if you expect you someday might find yourself explaining to the police how you made the money in the first place.
- michael schuman / hong kong and susan Jakes / shenyang
- The sudden fall of tycoon Yang Bin throws an unflattering light on Mainland private enterprises