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dam-l SCMP Comment: Three Gorges damned



May 3, 2000
Comment: Three Gorges damned (SCMP)

JASPER BECKER 

"I have abandoned all hope," wrote a deputy director
of the Three Gorges Economic Development
Corporation in the suicide note he left behind when
he killed himself on February 22. "There is no way
out for me. I need money for medical fees but, since
August 1999, I have not been paid." 

For eight years, officials like the late Song Yonghui
lived high on the hog, borrowing and spending
billions of yuan in the name of the China's most
prestigious project. Then last year the money ran out.
Creditors began closing in on the company's
autocratic boss, 67-year-old Jin Wenchao, who has
disappeared leaving a mountain of debts and
thousands of angry and unpaid employees. Song
realised the company would never have the money to
pay the huge medical bills he had run up being
treated for a kidney disease. 

"We appeal to the higher authorities to send a team to
investigate the corruption and reconstruct the
company," wrote other desperate staff members in a
petition sent last month. One former employee said:
"No one knows how much money Jin Wenchao stole
- at least one billion yuan [about HK$930 million],
maybe more. Most was sent abroad. We think he
transferred a bank loan of at least US$9 million
[about HK$69 million] to the United States." 

Speaking on the condition of anonymity, staff
members of the now defunct company, which once
had 160 branch companies and 2,600 employees,
500 in Beijing alone, revealed a gigantic scam run by
an individual with connections right up to the
Politburo. Officials contacted at the headquarters of
Three Gorges Project Construction Committee of the
State Council, the parent company of the bankrupt
Three Gorges Economic Development Corporation,
confirmed the existence of the scandal, but refused to
say more. 

"It is a very bad company cheating people
everywhere, so we have no connection or links with
the company any more. We separated from it last
year," said an official who gave his name as Ye and
then abruptly hung up. Security guards at the
subsidiary's head office said the boss had not been
seen since Lunar New Year. "Only about five people
now work at this company and they arrive late and
leave ear ly in the afternoon," one said. 

Mr Jin is described as a barely literate former PLA
man from Gong Yi county outside Zhengzhou, in
Henan province, who was in charge of a small
reservoir in the poor area until 1992. He was then
hired by Li Boning, the former Deputy Minister of
Water Conservancy during an inspection tour. 

The Three Gorges Economic Development
Corporation was set up in 1992 to provide support
services to the Three Gorges Dam project, a plan to
build the world's largest hydro-electric power scheme
on the Yangtze River, which will involve resettling
1.6 million people before completion in 2009. The
corporation was supervised by its Resettlement
Bureau. It initially had only 20 to 30 staff, mostly
ex-army men. A year later Mr Jin began to appoint
provincial managers. "He sold the positions for
500,000 yuan to one million yuan," a former
employee said. "He got in touch with his friends and
hired them as managers of provincial branches, but
only if they were willing to pay him." 

What Mr Jin actually ran was a "briefcase company"
with an official chop - the Three Gorges Company
seal - as the only asset. This chop enabled Mr Jin and
his associates to demand loans in the name of the
project. 

After the 1989 Tiananmen massacre, the mainland
was placed under economic sanctions and the project,
backed by then premier Li Peng, was touted as a
symbol of self-reliance and diplomatic defiance. It
had the highest political guarantees and anyone who
opposed it risked being accused of opposing the
Communist Party. 

The biggest branch of Mr Jin's company was in his
home town of Zhengzhou. Founded in February
1993, it lost 20 million yuan within six months. But
when work started on the Three Gorges project in
1994, the branch suddenly found itself with a licence
to borrow more money. "Everyone hoped to make a
lot of money out of the project," the branch general
manager said. 

Dai Qing, a writer who is a fierce critic of the project,
said: "In public they say the project costs US$30
billion, but in fact it is more like US$70 billion.
Officials see it as a huge opportunity to get rich. It is a
black hole." 

Mr Jin's son, Jin Jiyuan, borrowed 30 million yuan
from the Zhengzhou trust and investment
co-operative and transferred it to Guangzhou, where
he established a branch of his father's Three Gorges
company. His daughter, Jin Jihui, borrowed 280
million yuan. 

No one is sure where all this money went. But it was
not long before the Zhengzhou trust collapsed, in
1997. That brought protesters onto the streets of the
central Chinese city to demand their money back. The
demonstrations lasted until 1998 when Premier Zhu
Rongji sent a special team to investigate the collapse
and ordered a news blackout. 

"I cannot speak about this," said Song Wensheng, an
official at the Zhengzhou trust, which has been taken
over by the state and renamed the Zhengzhou
Commercial Bank. Some of the money obtained by
the Jin family seems to have been lost in the
Zhengzhou futures market after its operations were
virtually shut down by Mr Zhu. 

Zhengzhou police confirmed that the son, Jin Jiyuan,
had been arrested by an investigative unit set up by
the Zhengzhou Procuracy. The authorities are also
searching for the daughter and her boyfriend, who
appear to have bought foreign passports and fled
abroad. The Beijing Public Security Ministry refused
to comment. 

The family resorted to many other scams, including
dealing in iron and steel with the Handan Iron and
Steel Works in Hebei, a national model for
state-owned enterprise reform. "Each month he [Jin
Wenchao] purchased several thousand tonnes of steel
from the company at very low prices of 2,000 yuan to
3,000 yuan per tonne in the name of the Three
Gorges construction, but he resold them and kept the
profits himself," said company official Liu Yaxin.
Sources said Mr Jin kept 200 million yuan in profits. 

Details of additional loans totalling 350 million yuan
have been found as well as a front company
registered in Hong Kong as the Qiao Ruo Company.
The son also set up a fake joint venture to build a
"leisure centre" through a front company in Yichang,
the Hubei province city that is the base for the Three
Gorges project. 

The father also obtained loans of 50 million yuan
from the China Construction Bank and further sums
from the Industrial and Commercial Bank and the
Bank of China, among others. He also diverted 150
million yuan from the project's resettlement funds to
his son's companies. 

Former employees believe their boss used a standard
scam to transfer the money abroad. To finance the
imports and exports of state trading companies, the
Bank of China issues foreign exchange guarantees.
This means that if an enterprise fails to repay the
bank, the state shoulders the loss. Former employees
claim their ex-boss gave cars to senior managers at
the Bank of China who have since been fired. 

Mr Jin was detained for two weeks by Beijing police
last year after he failed to repay his debts to the China
Construction Bank. The bankers discovered that,
following a State Council decision in late 1998, all
state organisations have to divest themselves of their
commercial enterprises. 

So the loans and losses of Mr Jin's company were no
longer guaranteed by the state, raising the question of
who was to pick up the bill. 

Sources claimed that the Three Gorges Construction
Committee's Resettlement Bureau, the parent
organisation, helped secure Mr Jin's release. It feared
that if he was jailed the department would have to
cover his enormous losses, particularly the 600
million yuan in registered capital. 

"Jin would make false financial reports and the
Resettlement Bureau defended him," recalled one
company official, who added: "If I am going down, a
lot of people are going down with me - that is what
people fear." 

Mr Jin also reportedly enjoyed some support from
Guo Shuyan, the deputy director of the Three Gorges
Construction Committee. He studied in the former
Soviet Union with National People's Congress
chairman Li Peng. 

Beijing is full of rumours that last autumn, Mr Li Peng
and Zhu Rongji had a fierce and bitter exchange
during a Central Committee meeting over corruption
in the Three Gorges project. Mr Zhu is believed to
oppose Mr Li's push for the "develop the west"
programme, which includes new dam projects along
the Yangtze and Yellow rivers.

Jasper Becker is the Post's Beijing bureau chief.


_____________________________________
Doris Shen
International Rivers Network 
1847 Berkeley Way
Berkeley, CA 94703
doris@irn.org   
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fax: 510.848.1008
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