After five years of gathering evidence, Fu Jianzhong is hoping to launch an international case over his investment in a Russian forest, which he claims has resulted in losses of over 250 million yuan ($41 million).

"A local interest group set a trap and illegally took back the timberland we had bought," Fu told the Global Times Monday.

Fu, who is 62 and the chairman of Zhejiang Eternal Industry Group, a private company specializing in real estate, finance and trade, showed the Global Times around 100 pages containing 173 items of evidence, as well as investigation results released by various government departments in China.

In 2003, Fu set up a joint company named Heilongjiang Xinzhou Timber Co together with State-owned Chenneng Trade Co, to buy 100 percent stock rights in Khabarovsk Muxing Timber Co. Xinzhou Group had a 70 percent stake in the joint venture.

Via the deal, the joint company obtained the operation rights to 247,000 hectares of forest for 49 years in Khabarovsk, a city in eastern Russia that is around 30 kilometers from the Chinese border.

The joint company had invested a total of 250 million yuan in developing the project by the end of 2007.

China Development Bank, one of the three policy banks in China, also offered a 230 million yuan long-term loan for the investment in 2003.

Local conspiracy?

However, the local procuratorate in Russia closed down Muxing Timberland on March 9, 2007, saying that a driver in charge of transporting timber was suspected of stealing timber from other woods.

Fu said the transportation company the driver worked for was hired by Muxing Timber to transport wood, and that the driver was not an employee of Muxing Timber.

But later, the local procuratorate issued further charges, including failure to pay fees for use of resources, and required the timber office of Khabarovsk Natural Resources Department to terminate its contract with Muxing Timber.

"The whole process was a scheme by the local authorities," Fu said.

First, the authorities didn't make it possible to pay the fees for use of resources, according to Fu.

"And second, the procuratorate illegally closed Muxing Timber, which meant that our company was unable to comply with the terms of the contract," Fu said.

Eventually, the forest was auctioned by the procuratorate and its business operation rights were taken back by the Khabarovsk Natural Resources Department in 2007.

"The major motivation for the local interest group was the rising price of wood since 2006," Fu explained.

Due to comprehensive investment by Muxing Timber from 2004 to 2006 and rising international wood prices, the market value of the forest had nearly doubled since 2003.

"The local procuratorate violated the laws. For example, it started an auction for the forest even though there hadn't been a court ruling on the case," said a document released by the Bureau of Commerce of Heilongjiang Province in August 2007, and e-mailed to the Global Times by Fu.

"The local procuratorate had a special aim to grab the logging rights for a certain interest group … that had power and influence and could manipulate the local procuratorate and security department," the Bureau of Commerce of Heilongjiang Province said in the document, which was also submitted to the Ministry of Commerce (MOFCOM).

Other Chinese official departments including the National Development and Reform Commission and China Development Bank, which have also launched their investigations, came to similar conclusions, according to testimony made by Fu to the Beijing Arbitration Commission in 2012.

Fu said he submitted an application on December 12, 2012 to the Bureau of Commerce of Zhejiang Province, to apply to MOFCOM to launch international arbitration this year.

The Ministry of Economic Development of the Russian Federation could not be reached for comment by press time.

Negative image

Fu is not the only Chinese businessman who has suffered harsh treatment in Russia.

It was reported in 2009 that Russian authorities destroyed a batch of products with a total value of $2 billion that they said had been smuggled from China.

But businessman Ni Jixiang told the Beijing-based International Herald Leader that the goods had not been smuggled. The local goods clearance companies wanted to avoid paying business tax, so they hadn't provided the necessary tariff receipts to the Chinese companies, said Ni.

Similar reports have been common in the past 10 years in both the Chinese and Russian media.

"The Russian media always presents a negative image of Chinese businessmen, which makes it more difficult for us to do business in Russia," a man surnamed Yang from Zhejiang Province who is engaged in a vegetable business in Moscow, told the Global Times via telephone Monday.

"Unlike large European companies, most of our Chinese companies are small-sized ones, and we don't have enough power to protect ourselves here in Russia," Yang noted.

Cai Guiru, director of the Moscow-based Russia China Business Chamber of Commerce, who has worked in Russia for 18 years, told the Global Times Monday that "Fu's case is much more complicated than what you have heard, and more investigation is needed."

Cai said she would talk with related departments in Russia about the case. But she agreed that Russian people have had a negative attitude toward Chinese businessmen for a long time.

"I think Russia has paid more attention to its reputation in international trade, given that it finally joined the World Trade Organization in December 2011, after 18 years of negotiation," Cai said.

Cautionary tale

"International arbitration is necessary for the case," Lai Jianping, an independent researcher and a former partner at Beijing-based Transking Law Office, told the Global Times Sunday.

It's difficult to make a judgment on the case, Lai said, while noting that Chinese companies planning to invest abroad can still learn lessons from it.

"As well as complying with local laws and regulations, the companies also need to understand more about the investment destination, like their culture, politics and public opinion, as well as social relations," Lai said.

Fu said he is confident he will win the lawsuit if MOFCOM agrees to help him apply for international arbitration as he has enough evidence.

But Fu also confessed that the risks of investing outside are much higher than he had expected. "A comprehensive investigation is the most important preliminary step," he said.