Weapons of Mass Destruction (WMD)

DATE=6/4/2003

TYPE=CORRESPONDENT REPORT

TITLE=CHINA TYCOON (L-O)

NUMBER=2-303982

BYLINE=BENJAMIN SAND

DATELINE=HONG KONG

CONTENT=

INTRO: A leading business tycoon and one of China's richest men is being investigated for financial irregularities and is under house arrest. The arrest is one of several in what appears to be a series of shady bank dealings. Benjamin Sand has more from Hong Kong.

TEXT: Zhou Zhenyi is one of China's new "glorious rich." He parlayed his small noodle shop into a vast real estate and financial empire, which according to Forbes magazine makes him China's 11th richest man, worth more than 320-million dollars.

But since May 26th, Zhou has been under house arrest while government auditors investigate his primary business, the Nongkai Development Group.

Mr. Zhou's wife, Mao Yuping, was arrested Monday in Hong Kong on related charges. She was later released on a record one-point-three-million-dollar bail.

The pair is at the center of a rapidly expanding probe. According to Chinese state news agencies, Mr. Zhou is suspected of filing fraudulent tax receipts and using capital from questionable loans to speculate on the stock market, which is not legal in China.

Mr. Zhou is also being investigated for a land development deal in Shanghai, where more than two-thousand people have been relocated from land they say the government gave to Mr. Zhou for free.

Analysts say the investigations are significant because Mr. Zhou has powerful connections and is a prominent figure in Shanghai.

Eric Tollefson works for China Concept Consulting in Beijing.

/// TOLLEFSON ACT ///

There was probably a dog-fight to get this guy and to look into his finances. One of the Shanghai government officials said this guy is really trouble, which in China means he is really connected.

/// END ACT ///

The arrest of Mr. Zhou and Ms. Mao prompted officials at the Shanghai and Hong Kong Stock Exchanges to suspend trading in several companies controlled by the couple.

In addition, officials in Hong Kong are confirming that they have arrested at least 21 other people in connection with the investigation.

The arrests appear to signal Beijing's frustration with the country's new capitalists, some of whom are moving their wealth off the mainland.

/// 2nd TOLLEFSON ACT ///

The Chinese are aware of this influx of money out of the country and are looking, not to stop it, but to have those who are engaged in the activities come clean on exactly what income they are making off them.

/// END ACT ///

The new Chinese president Hu Jintao says he intends to make fighting business corruption a top priority.

Business mogul Yang Bin, who made a fortune in flowers, goes on trial next week for economic misdeeds. (SIGNED)

NEB/BS/RAE/KBK