The coal barons’ billionaire banker
Global Times | 2013-2-1 1:38:01
By Li Xiang
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Gong Aiai, the "house sister" from a coal town in Shaanxi Province, owns 41 properties measuring a total of 9,666.9 square meters in Beijing, the municipal public security bureau said on its official Sina Weibo account Thursday.

The number was an increase on the previous figure of 12 units that had been exposed in media reports on Gong - a poor woman from a large family who rose to become a billionaire and local deputy to the Yulin people's congress, and on the way somehow picked up four sets of hukou, or household registration permits.

Beijing police said in a brief statement that the Audi car and 10 properties covering some 2,000 square meters, all purchased with her illegally registered Beijing hukou, had been seized. A closer investigation reveals that Gong Aiai - who has now mysteriously vanished - amassed her wealth via the coal industry, using loopholes in the rules regarding transfers of State-owned assets and private lending.

A black road to wealth

The Beijing-based magazine the Legal Weekly reported that Gong Aiai began her path to wealth in 2004, during her six years serving as the deputy manager of the Xingcheng branch of the Shenmu Rural Commercial Bank. She had originally been hired by the bank with the help of a network of connections in 1986.

A bank executive position on its own would not be enough to amass such fabulous wealth, but the surging prices of coal over the last decade, and the county's more than 50 billion tons in reserves, proved to be the foundation for her plan.

She became a popular source of financing for an army of capital-thirsty local mine owners, who were all taking the opportunity to expand their production capacity.

By quenching their thirst for capital, Gong allegedly received free stakes in many mines as a show of gratitude by the coal barons to government officials and the banking regulators who had offered assistance, the magazine said, citing a source close to the matter.

When reports of her wealth first surfaced, Gong explained that the money she had spent on properties in Beijing had been from her extended family's various businesses including coal mining.

"For years, my siblings and I have been busy managing the mining business," she said.

Over 100 former employees with the local Dabianyao coal mine claimed that Gong's brother, Gong Zisheng, in cahoots with other government officials, masterminded the ownership transfer in 2004, which caused a great loss in State-owned assets through privatization.

A worker with the coal mine told the Global Times that Gong Aiai was the real mastermind, and that the coal mine, then valued at 300 million yuan, was taken into private ownership at a price of less than 100 million yuan.

"Without Gong's close connection with the bank, it was impossible for her, or any of the mine owners in Shenmu, to allocate tens of millions of yuan for a coal mine in 2004," a former employee with the company told the Global Times.

It wasn't all smooth sailing however. A Thursday report in the Southern Weekly newspaper said that Gong tried to commit suicide in October 2012 after her chain of capital broke down, in the wake of huge swathes of private lending evaporating. In one case, Gong was said to have lost 120 million yuan.

A widespread problem

Dozens of workers recently signed a report letter on the loss of State-owned assets during these transfers, which was sent to the Central Commission for Discipline Inspection of the Communist Party of China.

"It happens a lot," an inspector from the State-owned Assets Supervision and Administration Commission of the State Council, told the Global Times, adding that most State-owned coal mines were privatized at their previous lower prices rather than their real market value.

"By using auditing tricks, the value of the mine can be rated down to what it was before, and through the whole process, mine owners are those who gain the most by purchasing them at devalued prices from the local government," he added.

Gong also made money by issuing more stock to gain more profits from the mine's initial 1.19 million yuan in registered capital, to 3.2 billion yuan, however, the earnings per share were diluted. This proved to be a way of bypassing the ban on the transfer of coal mines.

"In this immature market economy, people can become rich overnight without hard work. That extreme inequality destroys many people's faith in the system," said Xu Xianglin, a professor of the School of Government with Peking University, adding that collusion among private enterprises, banks and local governments is endemic across the country and people like Gong should be punished to assuage public anger.

"It happens a lot in small towns or cities with abundant mining resources such as Shenmu and Erdos in the Inner Mongolia Autonomous Region," Xu added.

He said that because a large amount of liquidity is needed to exploit resources only large private loans could meet the demand, adding that there are big deficiencies in the country's financial supervision system.

China's banking regulatory commission does not have the right to punish misbehavior, as it only has supervisory functions.

Shenmu was listed as one of the country's top 100 richest counties in 2005 and according to a report on private capital investment released in May 2011, the county has over 2,000 individuals with personal assets of over 100 million yuan.

The vanishing woman

In the midst of this controversy Gong has vanished from the public eye. A press officer surnamed Xue from the publicity department under the CPC Shenmu County Committee told the Global Times Thursday that there has been no information on Gong's whereabouts so far, and that Gong Ziyu, one of her brothers, had been taken away for investigation.

The Xinhua News Agency said Thursday that it wouldn't be hard for the police to track down Gong, however, "her disappearance has put a layer of haze on the whole case." The agency also said that "those who are hiding behind the scenes are trying to cover something up since more people have been sucked into the black hole of this case."

The Supreme People's Procuratorate also said they would supervise the probe into Gong's case by local prosecutor's offices in Beijing, as well as Shanxi and Shaanxi provinces, in an effort to reveal how she received four sets of hukou.

"Only when all procedures are known to the public will people stop being suspicious," Gan Chaoying, an expert on the Constitution and administrative law from Peking University, told the Global Times, adding that the government will not earn any trust from the people until transparency is improved.

Liu Sha contributed to this story

The registered address on Gong Aiai's Beijing hukou is an apartment on the 25th floor of Building 1 at the Tianlangyuan community, also known as Building A of the Fortune Center Ao City, in Chaoyang district. The apartment has been rented by a technology company for more than six years. Photo: CFP

The registered address on Gong Aiai's Beijing hukou is an apartment on the 25th floor of Building 1 at the Tianlangyuan community, also known as Building A of the Fortune Center Ao City, in Chaoyang district. The apartment has been rented by a technology company for more than six years. Photo: CFP


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