Former richest man of China is charged with financial crimes

Tycoon is indicted amid growing unease of Beijing elite over private wealth

James Moore,Deputy Business Editor
Tuesday 16 February 2010 01:00

A tycoon who was once the richest man in China was charged yesterday with bribery, insider trading and illegal business dealings.

The trial of Huang Guangyu, the founder of China's largest consumer electronics chain, Gome Electrical Appliances, will be the highest-profile case yet involving a private entrepreneur in the country. It will be watched closely by China's business community because it highlights the risks of operating in the Communist state.

While the economy has grown at breakneck pace since Beijing adopted market reforms, it can still prove to be a minefield for business people because of politics and the need to stay in favour with party officials. Hundreds of government apparatchiks are reported to have been rounded up during the investigation into Mr Huang's operations, which saw him amass a fortune once estimated at $6.3bn.

Reports of the charges in state media suggestthat his penalty could be much harsher than was first expected when he disappeared into custody about 15 months ago. He was initially held on suspicion of stock market manipulation, but during his time in jail several officials have been ousted after themselves being accused of corruption. They include a former deputy minister of public security and a former deputy police chief of Shanghai.

The first indications that there was more to the case came on Christmas Eve, when prosecutors claimed to have uncovered evidence pointing to "new crimes" involving Mr Huang. That facilitated an extension of his detention, leading to speculation that more serious charges would be levelled.

Mr Huang's life story has been one of rags to riches. He was one of the entrepreneurs who benefited from a boom that is expected to see China confirmed as the world's second-biggest economy later this year, and the world's biggest before too long.

The 40-year-old son of poor, devout Christian peasants from the southern port of Shantou, he turned his single street stall selling radios and watches into a huge chain with almost 600 branches across mainland China. He was nicknamed the "price butcher" because of the discounts available in his stores, had a growing property empire and lived in a big home hung with chandeliers in a gated compound in Beijing.

His arrest once again put the spotlight on the opacity of China's justice system – he disappeared for several days before any announcement was made.

The Hong Kong Stock Exchange, where Gome Electrical is listed, was forced to suspend trading in the company's shares briefly after his arrest. Mr Huang's wife and elder brother have also been held in connection with the case, although it is not yet known whether they have been charged.

The case comes at a time of increasing unease in China about the vast wealth gained by some business people. In a poll by The People's Daily, the Communist Party mouthpiece, a majority of respondents said they felt that individuals or families who had gained during the boom years were "corrupt". Only 16 per cent thought such wealth had been accrued through "wisdom or hard work".

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