British woman is held by Chinese for embezzlement without charges  over business deal

A British businesswoman has been held for the past 11 days in a Chinese detention centre, accused of embezzling funds from a company responsible for China's biggest wholesale market.

A British businesswoman has been held for the past 11 days in a Chinese detention centre, accused of embezzling funds from a company responsible for China's biggest wholesale market.

Although Guo Peixuan is reportedly being held in a small, filthy cell with 18 others, the Foreign Office appears powerless to help, as she entered China using Hong Kong identification papers, not her British passport. She is one of only two British citizens known to be detained in China.

Police seized Ms Guo, 43, from a Peking office tower on 21 August and took her to the Liaoyang Detention Centre near the city of Shenyang in north-east China. Members of Ms Guo's family who visited Liaoyang report terrible conditions in the cell, where the all-female inmates barely have enough floor space to lie down. Ms Guo has not been charged and her family fears she will be detained for up to 30 days before the formal legal process begins.

Ms Guo, a resident of Hong Kong, entered China on a "return home certificate", favoured for convenience by many Hong Kong residents whose parents or grandparents fled to the former British colony from mainland China. No visa is necessary for holders of the credit card-like document, which is processed through a fully computerised system. The main drawback is that Chinese authorities therefore regard Ms Guo as a Chinese national, and are likely to deny British diplomats automatic right to consular access.

"We will do all we can," a British embassy spokesman said yesterday, "but a British passport is not a get-out-of-jail-free card." Diplomats in Peking are consulting with London on the correct procedure to follow. Three years after the handover of Hong Kong's sovereignty to China, the Foreign Office remains careful not to annoy Peking on territory issues.

The detention appears to mark an extension of a complex and long-running feud between Ms Guo and a former business partner, Xue Xuehua, a Singaporean national. After making a number of investments across China, the friends fell out in 1996 over plans to expand their $2.5m (£1.56m) Shenyang real estate company into a retail and wholesale market selling clothes and other goods.

While the Wu'ai market boomed, attracting thousands of retailers and wholesalers, the two protagonists became embroiled in arbitration stretching from Shenyang to Shanghai and Shenzhen, bordering Hong Kong. The quarrel has become a battle of wills and guanxi - the "connections" or relationships still crucial to business success in China. Both women are from wealthy overseas Chinese families whose investments have made them powerful friends.

Some sources suggest Ms Xue even persuaded the Chinese Premier, Zhu Rongji, to write to the Shenyang government recommending the criminal investigation into Ms Guo's affairs. The Mayor of Shenyang, Mu Suixin, is also said to favour the Singaporean version of events. Once the legal process formally starts, prosecutors would have to substantiate allegations that Ms Guo embezzled funds belonging to the real estate company.

While the Chinese government has promised to improve the commercial legal environment, as part of efforts to join the World Trade Organisation, reservations remain about the due process of law in a country where legal transparency is far from established.

If found guilty, Ms Guo could face a long prison sentence. Her British passport should reduce the likelihood of the death penalty, sometimes given in large-scale corruption cases.