From Road King to Road Kill

BY LEE HAN SHIH
Dec 12, 2008
*Special to asia!

The bell is tolling for Zhang Rongkun who once had a net worth of US$605 million.

It took Zhang Rongkun 34 years to claw his way up from nothingness to having a net worth of 10 billion yuan. It took him just three years to topple himself from that lofty height, to become a prisoner of state and a witness in one of the biggest scandals in modern China.

In July, Zhang was quietly led away from his Fuxi Investment Holding Co, a private firm that controls some of the most lucrative toll roads in China. He is now believed to be under custody and giving evidence against former Shanghai party secretary, Chen Liangyu, and others who have milked huge sums out of the city pension fund. He has also been dismissed from his post as a member of the prestigious but toothless National Committee of the Chinese People's Political Consultative Conference.

Given his prominence, Zhang is an obvious target of the anti-corruption drive launched by China’s President Hu Jintao against Shanghai, the stronghold of his predecessor Jiang Zemin and the last bastion that had until recently stubbornly refused to acknowledge his rule.

But his downfall has also been accelerated by overreaching that is entirely of his own doing. Zhang came to the notice of business circles in Shanghai in 2002, when his little-known Fuxi Investment bought a toll road there for 3.2 billion yuan. A year later he paid 5 billion yuan for another toll road, and in 2004 yet another 5.88 billion yuan for 20% of a toll road in Suzhou, his hometown.

Soon the press dubbed him the "Road King". Last year, Forbes named him the 16th richest man in China, with a net worth of US$605 million. This, more than anything else, brought him to the notice of China’s rulers in Beijing, and in a short time Zhang was investigated and arrested. He has now turned state’s witness.

His incarceration helped to explain something that had puzzled Shanghainese for the past few years: how Fuxi, with no previous record of having done anything major, was able to amass an asset base of more than 10 billion yuan in four short years. It is now known that 3.45 billion yuan of those assets came from the Shanghai city pension fund (for which Zhang was charged for bribery and fraud); 6 billion yuan or so from bank loans (the related bank officials are now sweating buckets); and the balance 1 billion from investment in the listed Shanghai Electric Group, another major company involved in the growing investigation of scandal and corruption in the city. It will take years, at least, before the city and the banks are able to recover those funds.

Zhang, bespectacled and chubby-cheeked, was born in scenic Suzhou in 1968, the eldest of three children of a father who occasionally worked as a rickshaw puller and a mother who sold eggs to help out the family. Unlike his siblings, who have been unremarkable, Zhang was clever in forging guanxi, or connections, with important officials, including a number of customs officials in Suzhou. (One of them was eventually sentenced to death for corruption, though it is likely that the sentence will be commuted to life imprisonment.) This made him his first millions, which he used to befriend officials in Shanghai, a much bigger playground for his practices. Zhang had been lavish in bestowing money on his parents and siblings, but warned them repeatedly never to talk about him and where he made his money. Now they know why.

 

lee han shihLee Han Shih is the founder, publisher and editor of asia! Magazine.

 

Contact Han Shih