When you meet a Beijing city official, he will give you the latest slogan 'the 1980s belonged to Shenzhen, the 1990s belonged to Pudong and 21st century belongs to Zhongguancun'. Zhongguancun, in northwest Beijing, is what the media call the mainland's Silicon Valley and is where several of the country's biggest computer manufacturers, such as Great Wall, Founder and Legend, and many of its universities and research institutes are based. But what the official was saying was not only a slogan but a piece of stock-market public relations, selling the 'Zhongguancun concept', which the city wants to be as successful as 'the handover concept' which saw markets in Hong Kong and the mainland boom in early 1997. This concept is crucial to the success of one of the most remarkable pieces of stock surgery in the mainland since share trading began in 1990 and being undertaken by the Beijing city government. In 1997, the central government dropped in the Beijing government's lap a hot potato - a listed company named Qiong Min Yuan, with 108,000 shareholders and trading suspended since February 18 that year after its chief executive was arrested in the country's biggest securities fraud. The company had announced annual profits of 570 million yuan (about HK$530.1 million) for 1996, of which 540 million yuan was false. The company was registered in Hainan - Qiong is another name for the island province - but the State Council decided that the Beijing city government should be responsible, because the firm's controlling shareholder was the Beijing city science and technology commission. The company had net assets of 737 million yuan, in property, tourism, agriculture and telecommunications, and the price at which its shares were suspended was 28.48 yuan. The city government did not want to wind up Min Yuan, because it did not want trouble from its 108,000 stockholders, so it tried to find a buyer. It approached developers and high-technology companies, but no-one was interested because of the size of the company. In August last year, it approached a large state-owned property developer, Zhu Zong (Zhu means residence). Its president, Hao Youshi, was interested in a takeover. 'We studied the idea carefully and saw an opportunity for our company. But we saw four obstacles - the company was too large, the number of shareholders too many, the share price at which it was suspended too high at 28.48 yuan and its profit per share too low, at 0.32 yuan.' In April, Mr Hao met shareholders of Min Yuan in Shanghai and Shenzhen, and they told him that, if the company had a future, it was not as a property company but in high-technology. To persuade Mr Hao to take the company over despite all these obstacles, the Beijing government had to provide a sweetener. On April 29, Mayor Liu Qi called Mr Hao and said: 'I will give you the Zhongguancun concept and you can list it.' Mr Liu gave him not only the name and permission to list but also the promise the city would designate the Zhongguancun area as 'a model science and technology park' where Zhu Zong would be the lead developer. That clinched it for Mr Hao. On June 2, the city government gave formal approval for the setting up of Zhongguancun Keji (science and technology), with Zhu Zong holding 55 per cent and six hi-tech firms in the area 6.15 per cent. These firms hold 300 million shares, or 61.55 per cent of the total share capital, with the 187.42 million shares of Min Yuan accounting for the rest. On June 8, 88 per cent of the Min Yuan shareholders voted to accept the takeover and the new company started trading on the Shenzhen market on July 12. That day the price soared to a high of 38 yuan and closed at 31.95 yuan, on trading of 66.42 million shares. Last week it traded at about 35 yuan. This month the company will have a one for one share issue, at about five yuan a share, which will raise nearly one billion yuan. It plans to spend part of the money on a 40 kilometre light-rail system circling the north of Beijing, which will cost 5.8 billion yuan to build over three years, starting this month. The rest will go on hi-tech projects and property projects. The whole operation has provoked praise and criticism. Brokers have argued Min Yuan should have gone bankrupt, that other companies in a similar situation should not be rescued and that Zhongguancun is in reality a property and not a hi-tech stock. Others have argued the takeover was necessary to preserve confidence in the market and to protect the interests of smaller investors, who are least likely to know of irregularities in companies they buy.