image image



China sends message to the private sector as tycoon Zhang Wenzhong exonerated

Former Wumart chairman’s case seen as a bid to reassure entrepreneurs that their assets will be protected by the Communist Party

PUBLISHED : Friday, 01 June, 2018, 11:31pm
UPDATED : Wednesday, 06 June, 2018, 4:20pm

For Chinese businessman Zhang Wenzhong, justice came with a broader message to his fellow private entrepreneurs who have been closely watching his case.

A decade ago, the retail magnate was thrown in jail for 18 years for bribery and fraud. Now, his exoneration is being held up as an example of the ruling Communist Party’s protection of private property, in an apparent attempt to allay private sector concerns over its increasingly heavy hand.

Zhang, founder of one of China’s biggest retailers Wumart, was declared innocent on Thursday by the Supreme People’s Court, following a lengthy appeals battle after being released early, in 2013.

His is the first guilty verdict to be quashed of three high-profile appeal cases involving private businessmen that the Supreme People’s Court vowed to retry in December – a move seen as an attempt to reassure entrepreneurs that their assets would be protected by the party, which in its earlier days vowed to “eliminate private ownership”.

Chinese court throws out former Wumart chairman’s fraud conviction

In an interview broadcast nationwide on Thursday, a solemn Zhang was keen to send home the message. “[I] really have to thank the party and the supreme court. It is because of the party central leadership’s rule by law and protection of property rights that my injustice of 12 years has been redressed,” he told state broadcaster CCTV.

Zhang said he had received messages of support and congratulations from hundreds of entrepreneurs across the country.

“Why do so many entrepreneurs care about this case? It is because it has too much impact. It touches on the lifeblood of private enterprises – whether ... they have the same rights as other companies,” he said.

The protection of private property has been enshrined in the constitution since an amendment in 2004 that recognised the growth of private business in the country. But legal experts have said that the addition was more symbolic than an effective legal guarantee.

More than a decade on, private property is still less protected in communist China than state-owned assets. Embezzlement of state-owned assets, for example, is punished far more severely in China than the same crime against private property.

Beijing tries to win over entrepreneurs with praise and promises

Officially, the party encourages the private sector to flourish, recognising its important role in economic restructuring. The sector now contributes more than 60 per cent of China’s GDP growth, provides over 80 per cent of jobs and contributes more than 70 per cent of technological innovation and new products in the country, according to the industry and commerce federation.

But many in the private sector have long been upset by unfair competition from the large state-owned companies, which have in recent years further squeezed their space – a phenomenon commonly known as guojin mintui, or “the state advances as the private sector recedes”.

“China’s private enterprises are surviving between the cracks, facing resistance and pressure on all sides,” said Hu Xindou, an economist in Beijing.

Private sector investment growth has fallen off a cliff from nearly 30 per cent in 2012 – the year China began publishing the data – to 3 per cent in 2016, edging up to 6 per cent last year.

Zhang’s exoneration also comes after a number of private tycoons have been rounded up as part of a broader crackdown on corruption, which has sent a chill through the business community.

Wu Xiaohui, the former chairman of troubled Chinese insurance giant Anbang, was sentenced last month to 18 years’ jail for fraud and embezzlement to the tune of around US$12 billion.

Anbang’s jailed chairman Wu Xiaohui appeals against fraud conviction

Xiao Jianhua, who has vanished from public view after being whisked in a wheelchair from a Hong Kong hotel across the border to assist a corruption investigation on the mainland, is still awaiting trial in court, as the Tomorrow Group he founded struggles to dispose of assets.

Meanwhile, other businesspeople have come under pressure from new government policies. Wang Jianlin, chairman of Dalian Wanda Group, has backed out of major offshore deals amid pressure from the authorities.

Apart from the high-profile cases, a large number of private entrepreneurs have been implicated in President Xi Jinping’s sweeping anti-corruption crusade, with many looking to move their wealth overseas before it is too late.

“[In China], if you don’t collude with officials, you can’t survive,” Hu said. “If you do, you might be punished at any time for reasons ranging from bribery to choosing the wrong side and becoming implicated in power struggles. The state’s strong intervention in the economy has made it extremely difficult for private entrepreneurs.”

Adding salt to the wound is the lack of judicial independence, meaning businesspeople can be handed arbitrary convictions, Hu said.

“You can be accused of fraud in fundraising, embezzlement or bribery – as long as an official doesn’t like you, there will be a crime to suit you,” he said.

Chinese companies seen as less corrupt as Xi Jinping’s anti-graft campaign bites

In Zhang’s case, the supreme court said in a statement there was no evidence Zhang had appropriated funds for his own benefit, adding that earlier rulings had “made errors”.

It cleared Zhang of forging documents to get subsidies related to government bonds. A payment of 300,000 yuan (US$46,800) to someone who helped Wumart in an acquisition was remuneration for services, rather than bribery, it said.

Shanghai-based lawyer Zhen Tao said many of the miscarriages of justice in China today came from either intervention from the government or campaign-style law enforcement such as a crackdown on telecom fraud.

“It’s not just private companies ... selective law enforcement happens in China’s judicial system that convicts one person and leaves others untouched,” Zhen said.

It was important that the judicial system be held accountable for these unjust cases, he said, if they were found providing fake evidence or fabricating it.

“Reversing verdicts is such a waste of judicial resources, and it doesn’t indicate any improvement to the rule of law,” he said.

Additional reporting by Sidney Leng