MCLC: 'rich sister' Wu Ying

[Denton, Kirk]

MCLC LIST
From: han meng (hanmeng at gmail.com)
Subject: 'rich sister' Wu Ying
***********************************************************

Source: The Guardian (3/21/12):
http://www.guardian.co.uk/world/2012/mar/21/wu-ying-death-row

Loans that led to China's death row: tycoon's case brings cries for reforms
Chinese critics say Wu Ying, 31, was unfairly singled out for
'commonplace' offence of illegal fundraising
By Tania Branigan in Dongyang

Wu Ying, head of the Bense Holding Group, on trial in 2009 on charges
of raising money by promising high returns to her creditors.
Photograph: AP

When she was seven, Wu Ying set her heart on a pair of long-haired
rabbits. She tended them devotedly, then trimmed and sold their fur.
She was in business.

China's capitalist adventure wasn't much older than she was. The two
flourished together. In 2006, by the time Wu was 25, she was said to
be the sixth richest woman in the country.

Now 31, Wu's fortunes have changed dramatically. She is on death row,
facing execution for fraud and raising money outside the banking
system.

Toppled tycoons are often regarded with schadenfreude, but Wu is seen
by many in China as akin to a martyr. Intellectuals and powerful
business people ­ even staff and creditors who lost jobs and money
when her empire crashed ­ say her offence was commonplace.

Her case has become emblematic of the difficulties of being an
entrepreneur under China's system of state capitalism, and of the
murky world in which much private enterprise is conducted, with
businesses forced to take risks to get ahead.

Upholding her sentence this year, a court in eastern Zhejiang province
said she had "brought huge losses to the nation and people with her
severe crimes, and should therefore be severely punished". The supreme
people's court is currently reviewing her sentence.

Others thought her prosecution and sentence caused the real damage.
"Wu's death penalty is a setback for the cause of reform in China,"
the influential economist Zhang Weiying said. "Judging from this case,
how far are we from the market economy? At least 300 years."

What some have dubbed "capitalism with Chinese characteristics" has
made China the world's second-largest economy, overtaking France,
Britain, Germany and Japan in the past decade. In the next 10 years,
under the new Chinese leadership that takes power this autumn, itcould
leapfrog the US.

But few believe its current trajectory is sustainable. Inefficiency,
corruption and wild speculation on anything from property to garlic
are common. The environmental and social costs of the boom are rising.
Inequality has soared. China's high-octane growth has been driven by
investment and exports, while domestic consumption remains weak.

"The liberalised labour market contributed to high exports, which
subsidised this extremely wasteful investment by the Chinese
government," said Victor Shih of Northwestern University in Chicago.
"Now China's trade surplus is shrinking, and shrinking much faster
than a lot of people had anticipated."

It has been hit by European and US woes, and its growing demand for
food and oil must be met largely through imports. "The ability of net
exports to subsidise wasteful investment will diminish ­ perhaps quite
rapidly. That will create a big challenge for the Chinese government
in the coming two to three years," said Shih. "It will take a few more
years before consumption becomes the dominant factor to fuel China's
growth."

Li Keqiang, who is expected to be the next premier of China, warned
last week: "China has reached a crucial period in changing its
economic model and [reform] cannot be delayed."

But Alistair Thornton of IHS Global Insight noted: "[Rebalancing] is
all that [President] Hu Jintao and [Premier] Wen Jiabao have talked
about... I'm increasingly sceptical that it's going to happen."

China's optimal growth rate will be around 7% in the coming years, he
said ­ but without reforms it could be three or four percentage points
lower, with "significant implications for employment, social stability
and everything else".

Wu's fortunes rose at the same breakneck pace as the Chinese economy.
She was smart, hard-working, ambitious. "I don't want to brag about my
daughter and say 'she is able'. But everyone thinks so ­ you can ask
them," her father, Wu Yongzheng, told the Guardian.

She started work in a beauty salon and then opened her own. Soon she
was running a string of businesses including dry-cleaning stores and
karaoke bars. Her former staff remain almost star-struck, describing
her as gutsy, innovative and pioneering.

As her business grew, so did her ambitions. In 2006, she shot to
national attention when she launched the Bense Group, with companies
in areas ranging from wedding planning to logistics.

Her father, a semi-educated labourer, ticked off the ventures as he
stalked angrily through her hometown of Dongyang, pointing at the
hotels taken over by rivals; the empty builders' merchant; the
500-seat internet cafe that never opened. "I didn't realise she had
such a big business: I would have opposed it," he said.

By mid-2006, Wu's investment binge seems to have left her struggling
for cash despite the hundreds of millions of yuan (tens of millions of
pounds) she had borrowed. She turned to new lenders, paying even
higher rates. Creditors began to worry. Then, in 2007, she was
arrested.

"Fundraising" from private lenders is illegal in China, but also
commonplace. Banks prefer to lend to state-owned enterprises,
sometimes because they are urged to do so but also because it is
safer: if it runs into problems, the debt will be restructured and
they will not be penalised. Official interest rates for savers are so
low ­ negative in real terms ­ that lending illicitly is much more
attractive than putting your money in the bank.

"Chinese companies, especially small ones, need to access funds. Banks
have yet to be able to meet those companies' needs and there is a
massive amount of idle private capital," Wen acknowledged when asked
about Wu's case last week.

Though she was charged with fraud, there is no sign that this was a
Ponzi scheme. There were real assets. Many of her creditors defend
her. "This whole case is not Wu Ying's fault. She borrowed money to do
business, not to spend on luxuries. If they hadn't toppled her we
would have made more money," insisted one, who lost more than 15m yuan
(£1.5m).

Supporters claim Wu was singled out because "she annoyed someone" and
lacked connections. Some think she upset influential creditors or
rivals; some that she refused to pay bribes. Her case is not about
enforcing the law, they argue, but about the law being enforced
selectively ­ and excessively ­ when the interests of money and power
coincide.

Many see such links between wealth and power, on a grander scale, as
the biggest obstacle to reforms. Others think the risks of instability
posed by restructuring finance, state enterprise and the labour market
are simply too threatening for leaders.

Stephen Green, chief China economist for Standard Chartered bank,
suggests a major economic overhaul could nonetheless be on its way.
"That something is going wrong is an ever-more common feeling. Second,
the belief that a huge crisis is inevitable without serious reform
appears to be gaining ground," he wrote recently. But "they have to
think very strategically, keep as many people on side as possible,
make sure one reform supports another ­ it is enormously difficult,"
he said.

Additional research by Han Cheng