Beijing will detain tycoon Yang Bin until he apologises and pays money allegedly owed to state agencies - and until North Korea agrees to closer consultation over its Sinuiju Special Administrative Region (SAR) which Yang heads, diplomats say. Beijing confirmed yesterday that Yang was under house arrest in Shenyang after being taken away on Friday morning. His whereabouts are unknown. Yang, 39, a Dutch citizen and reputedly the mainland's second richest man, was handpicked by North Korean leader Kim Jong-il to head the country's experiment in capitalism on the Chinese border. 'The two countries are holding intense negotiations over the issue,' one Asian diplomat said. 'Kim has sent one of his secretaries to Beijing with a personal letter setting out his position and asking for Yang's release. Beijing has sent an emissary to Pyongyang to explain its actions.' A mainland source said Beijing had set conditions for Yang's release. He would have to pay taxes he allegedly owes to the Shenyang Tax Bureau, a fee to the National Land Bureau for land he bought in Shenyang on which he is building his Holland Village estate, and a fine for allegedly failing to pay the fee on time. He will also have to propose a plan for paying tens of millions of yuan he allegedly owes to the principal contractor for the project. He must admit to his alleged wrongdoing. Beijing has also insisted that Mr Kim promise closer consultations with the mainland over the SAR. Beijing had been investigating Yang since June, unaware he was in negotiations with Mr Kim until Pyongyang announced on September 24 he would run the Sinuiju SAR. 'If all these conditions are met, Yang should be released and may be able to return to his duties as chief executive of the SAR, although Beijing might insist Kim choose another person for the post,' the source said. Diplomats said Beijing supported Mr Kim's economic reforms, including the SAR, but wanted a say in the process. Agence France-Presse reported yesterday that the mainland had confirmed Yang was under arrest. 'Yang Bin and his enterprises in China are suspected of involvement in various illegal activities,' it quoted Foreign Ministry spokeswoman Zhang Qiyue as saying.