North Korean leader Kim Jong-il will have to pick a new chief executive for his special administrative region to replace tycoon Yang Bin, who has been taken to Beijing for further investigation, diplomatic sources said yesterday. Yang, chosen by Mr Kim to head his new SAR last month, was arrested last week at his villa in the Holland Village development in Shenyang. Authorities have not revealed where they are holding him, but one Chinese source said he had been taken to Beijing. 'The leaders want this matter dealt with quickly, but do not want it to interfere with the smooth running of the 16th Communist Party Congress in November. If they cannot deal with it in the next two weeks or so, it will be put on hold until after the congress. 'With the accusations against him, Yang has no chance of serving as chief executive of the SAR. Kim will have to find a replacement.' An Asian diplomat said Beijing had ruled out deporting Yang, which would be a way of saving face for Mr Kim, who selected the tycoon personally, by avoiding the ignominy of a trial. 'That would make a mockery of China's laws. I see no alternative to him going to prison, when you consider the improper financial reporting of his listed company in Hong Kong and the things he is accused of in China,' he said. Foreign Ministry spokeswoman Zhang Qiyue said the bureau had been told by relevant departments that Yang and his enterprises in China were suspected of involvement in various illegal activities. Zhang Liangui, a professor at the Institute of International Studies, part of the Central Party School, said many business people in China, like Yang, had earned a large amount of money in a short time. 'His management methods are suspicious,' he said. 'Our legal system is not perfect, allowing loopholes, and it is normal to have a crackdown against such illegal business practices. 'The appointment of someone like Yang Bin as chief executive of such a zone is rarely seen in the world. If North Korea wants to appoint him, they should understand fully what kind of man is he, what his management methods are. 'Does he have real talent? What are his relations with society? For such a big project, they need to have a deep understanding and not decide in a rush.' Some nouveau riche were honest citizens who obeyed the law and others, like alleged smuggling kingpin Lai Changxing, were not, he said. 'Some cities in the northeast have a bad record. The Sinuiju SAR will mainly depend on China, which means that we and North Korea should consult closely on how it is set up. It could turn into a place run by mafia and a paradise for smugglers and tax evaders. If it is not established properly, it will be bad for both sides,' he added. The diplomat said Beijing was likely to lay down conditions for what could be built in the zone. Yang said he would permit up to 10 per cent of the SAR's revenue to come from gambling and entertainment and would launch a stock market for start-up companies. 'The gamblers and the start-ups would all be from China,' the diplomat said. 'Will Beijing agree to casinos and a stock market?'