Yang Bin’s wife faxes instructions
At 6 p.m. on October 4, we “consultants” who were still residing in Holland Village went for dinner at Hague Hotel. This included just Ma Ning, Wang Hui-Dong, Wang Nuo, Qiao Sheng-Li, Yang Da-Yong, Shi Jun, Li Gang and me.
Exceptionally, Hwang Myong Chol, the North Korean official who normally only dined with Yang Bin, also joined us. He told us that after Yang Bin was taken away by Shenyang police, he informed the Consul General of North Korea based in Shenyang, and Director Kim Dongkyu in Sinuiju who had mobilized tens of thousands of people to greet the SAR Chief Executive. Everything had been suspended. Kim Dongkyu was instructed to return to Pyongyang and Kim Jong Il had been informed this morning.
We all listened to him silently. Given, we had all had a premonition of some sort of “Yang Bin Incident,” but none of us had expected anything so serious.
Li Gang had just received a fax from Mrs. Yang in Holland. We passed it around the table.
Since Yang Bin was absent, Pan Chao-Rong was the only person who could arrange everything on his behalf. Her timely fax was a very important one. Here is the exact content of that fax (in translation):

To: All staff in the Euro-Asia Group, Vice-president Shi and the other Vice-presidents
First of all, thank you for remaining at your posts during this exceptional period. I hope that all of you cooperate with one another, continue to carry on your respective duties, and can overcome the difficulties ahead. We should have faith that our country and our government will deal with this matter fairly. Lastly, I hope that all staff will remain at your posts, continue to contribute to the development and construction of China’s agricultural modernization. Additionally, regarding the payments, any request for payment must first be approved by Sang and Feng, and then by Yang Feng-Lin, before a payment can be made.
The financial seals should remain with Shan Ting-Ting for safekeeping.
In addition, to avoid disorder after the holiday, we should request the government to station a workgroup in Holland Village in order to maintain order and normal operations of the firm.
Please contact me directly if there is any question.
Best regards,
Mrs. Yang
October 4, 2002
The Netherlands

“Sang” and “Feng” referred to Sang Shu-Hua, Chief Accounting Officer, and Feng Shuo, Accounting Director, both of Euro-Asia Industrial Company. Yang Feng-Lin, Yang Bin’s fourth aunt, was Vice-president of the company and manager of Hague Hotel. Shan Ting-Ting is Yang Feng-Lin’s daughter.
We noted that the fax aimed to keep control of corporate finances within Yang’s family, but Pan Chao-Rong did not appoint anyone to take charge of Holland Village. Nor did she detail a plan for maintaining normal operations.
At 4 p.m. on October 5, Weng Yong-Xi arrived from Beijing. After dinner, we gathered at the villa where Ma Ning stayed to discuss the situation. Except for me and Yang Da-Yong, everyone present—Ma Ning, Weng Yong-Xi, Wang Hui-Dong, Tong Lian-Fa, Wang Nuo and Qiao Sheng-Li—was a member of the SAR Preparatory Committee.
Since Yang Bin had never mentioned any of the details surrounding his companies, and we never inquired about the Holland Village project, none of us had a clear idea why Yang Bin had been “summoned.” Via the media, of course, we knew that there were three areas of concern: land usage, back taxes and the listed company.
Regarding Sinuiju, we discussed the fact that Zhang Qi-Yue, Spokesperson for China’s Ministry of Foreign Affairs, had expressed that the Chinese Government welcomed and supported the establishment of the SAR. What we had done as members of the negotiating team would “promote the opening up of North Korea”, “conformed to the policy of peaceful development advocated by Chairman Jiang Zemin” and would “contribute to the peace and development of Northeast Asia”. Therefore, the Chinese Government should not wish to make trouble for us. If the authorities welcomed us to continue our work, they would seek us out. We had to have faith that the leaders of the third generation of the CPC were wise enough to handle this issue competently.
The next day, everyone left Holland Village except Yang Da-Yong and me. I remained to collect information about the Yang Bin case, but it became so bitterly cold that I too had to leave. When I departed on October 28, I was the last of his “consultants” to leave Holland Village.
After Yang Bin was summoned for questioning, Holland Village was like a “host of dragons without a head.” This leadership vacuum, it should be said, was a result of Yang Bin’s family-style management. This enterprise, with assets of US$900 million, owned by the second-richest man in China, did not possess a modern management system. Even a petty expense of 1000 yuan could not be reimbursed without Yang Bin’s signature. And his signature was no guarantee; Feng Shuo, Euro-Asia Industrial’s Accounting Director, could reject any reimbursement application for any reason.
Euro-Asia’s vice-presidents had a lot of complaints about this, never mind how mid-level managers felt. Even Yang Feng-Lin frequently complained about this. Many times she told me her stories about getting upset over a request for funds. Staff hadn’t received their wages for over two months, and some, such as drivers and security guards, were not to be paid until Chinese New Year. With Yang Bin detained, and the group’s vice-presidents accustomed to taking action only when instructed by him, there was no one to take charge.
But winter had arrived. Holland Village was in urgent need of coal for heating—the plants in the greenhouses were withering daily.
On October 10 I spoke with Martin and Mary, flower specialists from the Netherlands. “All the moth orchids will die unless the greenhouses are heated.” As I understand it, heating was restored just after I left on the 28th, but it was too late. The work of the Dutch experts over the last two years had been in vain. All the costly plants imported from the Netherlands had already frozen.
“It’s time to go back to Holland!” said Mary as she departed, unpaid for several months.
Hague Hotel closed its doors. One by one, the Nanjing chefs left. Holland Village lay off most staff, keeping just a skeleton crew of boiler technicians, electricians and safety guards.
Holland Village was as still as a stagnant pond.
Hong Kong Wen Wei Po reported it as follows:

“The roads leading into Holland Village are still there, but gone is the former bustle of vehicles and people coming and going. The windmill—Holland Village’s landmark—still rotates slowly with resignation in the face of the freezing wind.
“Since legal action was taken against the ‘lord of the castle’ Yang Bin, leaderless Holland Village has ground to a halt like a clock without a spring. Sale of properties, construction work and all other activities have been suspended.
“This reporter met some guards who remain at Holland Village. They were all hired from nearby Xiaohan Village, and their current responsibility is to guard the key entrances to Holland Village. Their words revealed a sense of resignation and dissatisfaction. They hadn’t been paid for two months. But when they sought out the ‘head’ running things there, they were told their jobs could just as well be held by someone else in the Security Bureau. Unable to find a better alternative, they remain at their posts in the slight hope of eventually receiving their overdue wages.”

On October 6, Yang Feng-Lin went to the Shenyang Municipal Police Bureau again. The receptionist told her that Yang Bin had simply been “summoned for questioning”. He was staying in a nice place with good food, and smoking his beloved State Express 555 cigarettes halfway and then stubbing them out. These details convinced her they were looking after Yang Bin, but no visits would be allowed during this period.
On October 8, we learned his whereabouts. A French TV station reported that Yang Bin was being detained by the police in a villa 50 kilometers outside Shenyang. Yang’s relatives and friends were all trying to guess where it could be. Not long after, Xu Wei informed us that Yang Bin was being held in Ziwei Mountain Villa not far from Taoxian Airport. This lovely resort was the same place where Mu Sui-Xin, the former Shenyang Mayor, was interrogated before he was found guilty of corruption and sentenced to death.
The same day, I dined with Yang Feng-Lin, Yang Bin’s aunt. “Guan Shan, Yang Bin promised to pay taxes on October 12. Should we still pay them?”
I answered without hesitation. “Since it’s a tax payment, it has to be paid, even more so because Yang Bin had promised to do so.”
“But we’re talking about 16 million yuan!”
“These are taxes that Holland Village owes, no matter how large the amount,” I argued. “At least it will make him guilty of one less wrongdoing. Failure to pay tax is a criminal offense. Do you want to add to the charges made against him?”
“Well then, let’s make payment!” she decided.
“Is there enough money in the bank?”

“We have 16 million yuan, but we owe over 15 million!”
“Let’s make payment soonest,” I encouraged her.
On October 8, Yang Feng-Lin went to the Shenyang Tax Bureau to pay, but the bank account had been frozen. She asked the Tax Bureau Director to help unfreeze the account, and on the morning of October 9 she succeeded in paying 15.2 million yuan in taxes.
She showed me the receipts for the payments and gave me photocopies of all of them. I told her that she had done the right thing; no matter what sort of problem Yang Bin was in, the government would handle his case fairly. By paying his taxes, Yang Feng-Lin ensured that he would be charged with one less crime. This would be good for Yang Bin, because no country in the world permits tax evasion.

How serious were the issues surrounding Yang Bin?

I. “Yang Bin’s problems are exceedingly complex”
After the “Yang Bin Affair,” the international media published all sorts of speculative reports. Some of the most ridiculous originated in Hong Kong and South Korea. “The decision has been made by Pyongyang to replace the current Chief Executive of Sinuiju with Park Tae-joon, former Prime Minister of South Korea” reported one. The North Koreans wouldn’t even let South Korean journalists set their feet in Sinuiju. How could they appoint South Korea’s former Prime Minister—who resigned his post for alleged tax evasion—as SAR Chief Executive? The report even said that Pyongyang had extended a written invitation to this effect. One couldn’t help but laugh.

You have spent several months gaining a thorough understanding of Yang Bin and Holland Village,” said many journalists to me. “Just how serious are the issues surrounding Yang Bin?”
An answer of one or two sentences couldn’t do this question justice.
Susan Jakes, a reporter for the famous U.S. weekly Time, posed this question as I gave her a tour of Holland Village. Later on, the same question was raised by Lui Shiton of Chosun Ilbo, O’Neal of the South China Morning Post, Hong Kong Commercial Daily’’s Xu Xun and Xu Renfeng for Newsweek.
I first met Yang Bin on March 6, 2002. Later on, he personally requested that I write his biography. As a “media consultant” and thus a member of the “Yang Bin Delegation” commuting between Shenyang and Pyongyang, I had the opportunity of witnessing the entire process of negotiations for the Sinuiju SAR, including the drafting of the Sinuiju Basic Law. But I never forgot that I was there as his chosen biographer.
I had spent seven months at Yang Bin’s side in Holland Village. I interviewed Yang’s relatives, his classmates in primary school, high school and military academy, and Euro-Asia’s senior and mid-level managers and junior staff. But my purpose was clear: To prepare to write his biography.
But things were constantly in flux. It all started with that item published by the Shanghai-based International Finance News, referring to the “mysterious disappearance” of Yang Bin. I knew the report wasn’t accurate, because he had simply been accompanying an Argentinean entrepreneur on a tour of agricultural sites in Pyongyang. But I hadn’t expected that domestic and foreign media would subsequently raise so many questions about Yang Bin, and engage in such relentless coverage.
Most of their reports focused on issues such as overdue taxes, illegal use of agricultural land, and tardy payments to building contractors. I thought this was the same kind of malicious sensationalization once used against Shi Yu-Zhu of the Giant Group, Wu Bing-Xin of the Sanzhu Group and Feilong’s Jiang Wei. In fact, media manipulation was even more serious this time.
I did ask Yang Bin about land issues.
He replied in great detail: Holland Village covered over 3000 mu of land (note: one mu equals 1/6 of an acre), and the land was obtained in two phases. In December 1998, 1800 mu was requisitioned from Xiaohantun (Yuhong District), and the Shenyang Municipal Government approved it for “general use” at a formal meeting of the Mayor’s Office.
It is important to note that land use in China was regulated by “old” and “new” regulations, the latter taking effect on November 3, 1998. The 1800 mu in Xiaohantun were approved by the Liaoning Provincial Government under the old regulations. As “general use” land, its usage could be altered simply by reporting the change to the relevant authority. In 1999, four hectares of land were used for the construction of glass greenhouses, office buildings and villas.
The second phase of land requisition was made in response to the Liaoning Government’s proposal that Holland Village should possess “five key functions”: Industrialized agricultural production; a model for modernized agriculture; an export base to earn foreign currency; high added-value business, and a tourist site. Since there was insufficient land to handle these functions, a second phase of land requisition for an additional 1400 mu began the first half of 1999. In total, Holland Village then covered an area of about 3200 mu.
Yang Bin assured me that all these transactions were approved at formal meetings of the Mayor’s Office, and that he had the relevant Approval Documents and Land Use Permits in his possession.
Later on, I saw these Land Use Permits with my own eyes thanks to Li Gang, who had his staff bring them over. They included documents used in the paperwork for residential property construction.
As for the charge of “altering land usage,” media reported that Holland Village violated certain regulations by building a lot of villas, and therefore Holland Village owed overdue “Land Transfer Fees.”
To clarify this point, I visited Wan Shou-Hai, former Director-general of the Land Bureau in Yuhong District. Wan Shou-Hai told me what had happened under his tenure. “At the beginning of 1998, I was transferred from my position as Beiling County Head to serve as Deputy Director-general of the Yuhong District Land Bureau. I succeeded Du Shou-Fang as Director-General in July, but left at year-end.
“I only handled one project within Holland Village, namely greenhouses and workshops that totaled 150 structures in all. This is the villa complex there now.
“Why were the villas categorized as ‘workshops’? Xu Wen-Cai, Secretary of the Shenyang Municipal Committee, and Li Bao-Quan, Deputy Mayor, presided over the Mayor’s Office meetings. In the meetings, Xu Wen-Cai said Holland Village was a project that combined “five key functions” including high-tech agriculture, tourism agriculture and export-oriented agriculture. Local authorities had to give the project our full support. The ‘workshops’ comprised a combination of greenhouses and residential properties, and the latter must be built like foreign villas to entice foreign visitors to come, take in the sights and lodge there. This approach also reflected the features of ‘high value-added’ agriculture.
“We had to do our best to follow the instructions of provincial and municipal leaders. Projects championed by our leadership demanded our full support. That aside, ‘the combination of production, leisure, tourism and sightseeing’ described by Xu Wen-Cai made good sense too. Since Holland Village was the major foreign-invested project currently promoted by the provincial and municipal governments, as the local government it was up to us to follow instructions.”
“So, what about the ‘Land Transfer Fee’? ” I asked.
“Regarding the use of land in return for payment, the state requires payments of three main fees, namely a Land Transfer Fee, a Land Compensation Fee or Land Requisition Fee, and miscellaneous fees, including an Administration Fee for Land Requisition collected by the provincial and municipal governments.
“Land use can be exempted from the Land Transfer Fee under two conditions: if the land is for an agricultural project, or if it is allocated by the state. The District Land Bureau does not have the power to allocate land. Only the government has that power.” (1)
The first batch of Holland Village’s land was reportedly allocated for use in high-tech agriculture.
As for “owing back taxes,” Yang Bin also explained the situation in some detail.
“We are a foreign-owned enterprise and therefore exempt from taxes during the first three years. More than two years had elapsed, and we still didn’t need to pay tax for a further period of less than one year. But when we altered land use to build commercial housing, we needed to pay an additional fee of over 40 million yuan. In fact, the Shenyang Municipal Government had earlier borrowed US$10 million from me, or over 80 million yuan. I proposed using this money to pay the fee for altering land use, but they advised me to leave the money where it was, and said they would coordinate this matter. And so it has remained unpaid.
“You can seen the plaque hanging at the entrance to our office building, ‘A Model Tax-paying Enterprise’. That shows that Euro-Asia observes the law regarding tax payments. You can ask Li Gang and Shi Jun for more information since they handled those matters.”
Later, I made a point of going to Li Gang’s office and asking him about this. In May Li Gang had spoken with me in greater detail than Yang Bin, but their stories were largely similar. Shi Jun also confirmed the background of Euro-Asia Group’s 100 million yuan loan to the Shenyang Government.
I also asked Shi Jun to tell me about “late payments to the building contractor.”
“It’s true that we owe some payments for the construction work. But we have already paid between 70 and 80 percent. Actually, we’ve paid more than anyone else. Many contractors in Shenyang take out loans when they bid on a project, so if their clients pay half of what they owe, that’s already not bad.”
In August, as more and more doubts surfaced in the media about Yang Bin, Holland Village and Euro-Asia Agricultural Holdings, Yang Bin set up an “emergency workgroup.” Yang Bin asked Li Gang, me and two Shenyang-based journalists from the Workers Daily—Gu Wei and Hu Li-Yan—to come to his villa.
“Let’s set up an emergency workgroup,” said Yang Bin. “Li Gang, you will head the group, and Guan Shan and Bian Shou-Jie will be deputy heads. Assign some staff to collect all the questions raised by the media. Let’s find out what those questions are, and how best to answer them. For those questions directly related to us, let’s see how we can deal with them most rapidly.”
As we left Yang Bin’s villa, Gu Wei asked me why media coverage was so one-sided.
“I don’t know.”
“It’s been more than a month since that article appeared in International Finance News,” he pointed out. “How come it’s taken so long to come with a bit of emergency PR? Who’s in charge of media relations?”
Hu Li-Yan and I just smiled.
The “emergency workgroup” was located at villa F1. Li Gang recruited five or six young men from various departments and affiliates who collected news articles related to Yang Bin, Holland Village and Euro-Asia Agricultural Holdings.
Their print media summary consisted of abstracts of newspaper reports divided into five major issues: Land use, the real status of the operations of Euro-Asia Agricultural Holdings, outstanding loans, late payments to building contractors, and investments in North Korea. However, the emergency workgroup did not advise Yang Bin on how to resolve issues by rebutting them with facts, or how to convey to the media that certain issues were unfounded.
The villa where I resided was separated only by a patch of lawn from the villa where the workgroup was located, but I went there only once. They gave me a copy of their summary, and made copies of Land Use Permits that I browsed. The documents they showed me were the same as I had seen previously. From what I understand, however, they were never distributed to journalists.
My fellow “delegates” in the SAR negotiations privately advised me not to get involved with any issue related to Euro-Asia Group, and I never revisited the emergency group’s headquarters.
Meanwhile, after Yang Bin’s appointment as the SAR Chief Executive in Pyongyang, he flew back to Shenyang and was busy meeting with entrepreneurs, friends and journalists. Everything happened so quickly. The police vans began surrounding Yang Bin’s villa on October 1, China’s National Day, and at 5:10 a.m. on October 4, he was already in police custody.
As a writer, what had concerned me in the past were Yang Bin’s personality and his experiences. But once he had been arrested, I faced all sorts of questions about him and his business dealings from domestic and foreign journalists.
Therefore, I decided to stay on at Holland Village to carry out further research and interviews so that I could address those questions and concerns. Again and again I interviewed Li Gang, Shi Jun, Yang Bin’s aunts and uncles, Yang’s classmate Chen Hong, and Wang Jia-Tang, all of whom were still present in Holland Village. I wanted to have a clearer understanding of Yang Bin’s relatives, his military education and overseas experiences, all of which had been touched on by media reports.
But on October 28 when it became too cold for me to stay any longer in unheated Holland Village, I returned to Beijing.
I collected all the articles and materials about Yang Bin that I could find in the media, and conducted my own analysis of issues surrounding Euro-Asia Agricultural Holdings and Holland Village. Of course, I was unable to acquire many original files and data from the authorities and the police. I believe they are the only parties that can speak authoritatively about these issues.
But in this book I must do my best to give readers the most detailed explanation that I can. Therefore I can only discuss “how serious were the issues surrounding Yang Bin” based on the materials I have on hand.
The China Securities Regulatory Commission was the first central government institution to accuse Yang Bin and his enterprises of illegal actions. In its letter of September 29, 2002, addressed to the Securities and Futures Commission of Hong Kong, it indicated that Euro-Asia Agricultural Holdings was suspected of six violations, the third of which was “alleged illegal modification of land use.”
On the afternoon of October 4, China News Agency reported that the Shenyang Public Security authorities, based upon a case transferred to them by the law enforcement department, had placed Yang Bin under house arrest.
In reply to questions at the October 4 press briefing, Zhang Qi-Hua, Spokesperson for the Ministry of Foreign Affairs, stated that Yang Bin and some of his companies in China were suspected of having violated certain laws and regulations. Therefore, the Chinese Public Security authorities had already taken the lawful step of placing him under house arrest and would continue to investigate him according to the law.

II. Regarding illegal land use in Holland Village
One media reported: “Since October, a special task force formed by the central and Liaoning provincial governments has been at work in Shenyang. On the fourth floor of a three-star hotel in Shenhe District, reporters saw staff from Liaoning Land Resources Bureau with their heads buried in a map of Holland Village. On the window sill were files, piled several feet high, on the subject of Euro-Asia Industrial Company.”
The issue of land use in Holland Village was first raised during the 26th session of the Liaoning Provincial NPC Standing Committee Meeting on September 27, 2001. Gong Shi-Ping, Deputy Director of the Liaoning Provincial NPC Standing Committee, submitted the “Report on the Implementation of Land Administration Law in Liaoning Province.” In early September, the Liaoning Provincial NPC Standing Committee on the Implementation of Land Administration Law carried out investigations in Shenyang, Dalian, Anshan and Yingkou.
The report submitted by Gong Shi-Ping indicated that “the Shenyang Land Administration Bureau violated legal procedures and exceeded its approval power by signing a ‘Contract for Transferal of the Use of State-owned Land’ with Shenyang Euro-Asia Industrial Company, and by issuing a ‘Certificate for the Use of State-Owned Land’ to the latter. Although the Liaoning Land Administration Bureau has intervened many times, said company has not completed procedures to legalize transfer of this land to date.”
This report also confirmed that “the Holland Village project is not using the land for the purpose originally approved. It is developing real estate properties on land assigned for agricultural use, and it has not yet undertaken the formalities to obtain approval to date.”
Documents of the Liaoning Provincial People’s Assembly point out specific instances in which Euro-Asia Industrial Company violated the law: “From 1999 to the present, Shenyang Euro-Asia Group has not employed state-owned land for agricultural use as approved. Instead, it altered the use of the land on its own, using 2058.9 mu for non-agricultural projects such as real estate development, entertainment centers, clubs for overseas businesspeople, and retail shops.”
This violates Article 56 of China’s Land Administration Law: “Building firms using state-owned land should employ it in accordance with a ‘Contract for Transferal of the Use of State-owned Land’ or other contracts for paid land use, or they should use the land as specified in the Land Allocation Approval granted by the government. In cases where it is necessary to alter the use of the land, consent must be obtained from the land administration authorities of the People’s Government, and approved by the People’s Government that originally granted land use rights.”
The Liaoning Provincial State Land and Resources Bureau issued an “Advice on Land Use in Holland Village by Shenyang Euro-Asia Industrial Company” to Euro-Asia Industrial Company for its violation of land use regulations.
The Advice pointed out that Euro-Asia Industrial Company used some of the land within the area originally designated for a High-tech Model Agricultural Zone (Approval No. LZDZ (1998) 578) for non-agricultural purposes, i.e., 40.82 hectares (about 612 mu) real estate properties and garden villas for sale to the public.
As of September 2001 (date of the Liaoning Provincial People’s Assembly investigation), 27.82 hectares of land had been occupied, of which 18 hectares of land (about 180,000 square meters) was being used to develop real estate properties, and 9.82 hectares of land (excluding 9.9666 hectares for villas of experts attached to the Academy of Science) was for garden villas. In addition, Euro-Asia Industrial Company occupied an additional 0.7228 hectares of land to construct a flower market and a tower at the entrance to Holland Village.
The Liaoning Provincial State Land and Resources Bureau’s recommendation: “Euro-Asia Industrial Company should follow the new Land Administration Law as regards changing land use from agricultural purposes to commercial purposes, and should pay for this modification. For the 13 hectares of land whose development has been planned but not yet implemented, if development is to continue the firm should first apply to alter the nature of land use and pay for this modification.”
Regarding the additional 0.7228 hectares of land that Euro-Asia Industrial Company had occupied, the Land and Resources Bureau also took a tough line. “According to new Land Administration Law, a fine of 20 yuan per square meter should be applied (a total fine of 142,520 yuan). They should follow the new Land Administration Law to complete procedures for altering land use to construction purposes.”
Some media pointed out that Euro-Asia Industrial Company not only did not complete the procedure for altering land use or pay the requisite fees to do so; instead, it signed a Contract for Transferal of the Use of State-Owned Land with the Shenyang Land Administration Department, and in turn received a Certificate for the Use of State-Owned Land.
The procedure for obtaining approval documents for land use in Holland Village went like this: First, the State land Bureau of Yuhong District approved the land use; second, the application was presented to Shenyang Municipal Planning and State Land Resources Bureau, whose approval document number began with “LZDZZ;” third, the application was submitted to Liaoning Provincial State Land Resources Bureau for approval, whose approval document number began with “LZDZ.”
All told, there were four sets of approval documents from Liaoning Provincial State Land Resources Bureau regarding land use in Holland Village, as follows:
(1) No. LZDZ [1998] 598 Approval Document from the Liaoning Provincial People’s Government. Issued to Shenyang Euro-Asia Industrial Co., Ltd., for construction of a model high-tech agricultural zone. Location/nature of land: Xiaohantun (Yuhong District), collectively owned. Area: 121.515 hectares, of which 111.6361 hectares for the model zone.
(2) No. LZDZ [1999] 68: Location/nature of land: Peace Village, Bajiazi Village, and Shahezi Village (Beiling Town), and Xiaozhuanwan Village (Zaohua Town), all in Yuhong District, all collectively owned. Area: 26.7501 hectares, of which 23.4661 hectares for a high-tech sightseeing zone featuring flowers.
(3) No. LZDZ [1999] 391: Location/nature of land: Xiaohantun Village (Yuhong District), collectively owned. Area: 327.4193 hectares for construction of high-tech agricultural project.
(4) No. LZDZ [1999] 420: Location/nature of the land: Dahan Village, Xiaohantun Village, and Bajiazi Village (Beiling Town), all collectively owned. Area: 24.8463 hectares, of which 9.4802 hectares for a production base for cultivating seedlings, and 15.3661 hectares for modernized production of vegetables.
From 1998 to 1999, Euro-Asia Industrial Company requisitioned 210.53030 hectares of land in Yuhong District (3158 mu) with the approval of the provincial government. (2)
Requisitioned land was located in all the villages noted above (1-4), but land in Xiaohantun Village made up more than two-thirds of the total.
The Liaoning Provincial Planning Commission also issued a letter in 1998 (No. 140 (1998)), instructing that Shenyang Euro-Asia Industrial’s model high-tech agriculture zone was a “key development project.”
From the above, it can be seen that the land Holland Village occupied had been approved by relevant district, municipal and provincial state land and resource authorities. Moreover, it was also a designated key provincial project.
In January 2000, Shenyang Euro-Asia Industrial Real Estate Development Company was officially registered and established.
In December 2000, the Shenyang Municipal Planning Bureau issued Euro-Asia Industrial a Construction Site Planning Permit for real estate development on 5.17 square kilometers of land.
In March 2001, construction work began on apartment buildings in Holland Village.
“Five Permits” must all be obtained before a property developer can build and sell buildings: A Construction Site Planning Permit, State Land Use Permit, Construction Project Planning Permit, Construction Work Commencement Permit, and Real Estate Pre-sales Permit. These permits are issued by different authorities: The Municipal Planning Bureau (Construction Site Planning Permit and Construction Project Planning Permit); the Municipal Land Bureau (State Land Use Permit); Municipal Construction Commission (Construction Work Commencement Permit), and the Municipal Housing Bureau (Real Estate Pre-sales Permit).
In July 2001, the required paperwork for selling apartment buildings in Holland Village was completed. Specifically, on July 5 the Shenyang Municipal Housing Bureau issued Pre-sales Permit No. 01066, covering an area of 5.17 square kilometers of which 268,542.47 square meters could contain saleable structures. Note that this Pre-sales Permit was issued more than two months before Gong Shi-Ping, Deputy Director of the Liaoning Provincial NPC Standing Committee, presented the “Report on the Implementation of Land Administration Law in Liaoning Province.”
Therefore, Yang Bin’s statement that “I have completed procedures for land use” seems close to the truth. Some media accused the Holland Village project of having enjoyed “privileged treatment” from certain government officials in Shenyang and Liaoning. But this criticism was purely speculation; there was no proof to support it.
Thus, Yang Bin’s “being suspected of illegally altering land use” was neither utterly unfounded nor was it as speculated in the media. I consulted with legal experts in this area. According to them, the key to “completed procedures” lies in making three distinct payments, i.e., a Land Transfer Fee, a General Infrastructure Fee and a Farmland Requisition Tax. Unless these three additional payments were made, earlier contracts would be rendered “invalid.”
As noted earlier in this chapter, Yang Feng-Lin did hand over a huge payment in back fees—some 15.2 million yuan—to the Shenyang Municipal Taxation Bureau on October 10, 2002, even though Yang Bin was already in custody.
However, a further 40 million yuan for the Land Transfer Fee was reportedly still due. If this too had been paid, there would have been no infraction. Shenyang Government owed Yang Bin US$10 million, but instead of repaying him in cash then so that he could pay the outstanding fee, it was agreed that this money would be used to offset the outstanding Land Transfer Fee. The matter would be “coordinated” by the government.

III. Euro-Asia Agricultural Holdings: Suspicions of fraudulent financial statements
The Holland Village high-tech agriculture project was strongly backed by the government, and that support included project financing. Initially, Holland Village obtained loans from state-owned commercial banks such as the Shenyang Branch of Industrial and Commercial Bank of China and Agricultural Bank of China.
According to the executive in charge of credit at Shenyang’s Industrial and Commercial Bank of China, loans to Holland Village consisted of “project” loans and real estate loans. Project loans referred to specific construction projects, such as “Amsterdam Railway Station,” a tourist destination within Holland Village. At the time, these loans to Euro-Asia Industrial were considered virtually risk free since the land was properly mortgaged and the collateral was “the land within Holland Village and properties on that land.”
At the beginning of 2001, the Industrial and Commercial Bank of China recommended the Euro-Asia Group to its Hong Kong affiliate, ICEA. Thereafter, studies began on the possibilities of a public listing in Hong Kong.
Initially the Euro-Asia Group planned to list Holland Village as a whole. But the investment bankers were only keen on the high-tech agriculture zone; the theme park was unlikely to be profitable. Since this was too small for a listing, agricultural subsidiaries of Euro-Asia throughout China were grouped together to form “Euro-Asia Agricultural Holdings.” ICEA became the sponsor and lead underwriter, and eventually, with eight sponsors including CLSA and CEF Capital Limited, Euro-Asia Agricultural Holdings was listed on the Main Board of the Hong Kong Stock Exchange.
The process for a private firm based in China to list in Hong Kong is as follows: 1) The firm presents verification documents issued by a designated China law firm; 2) A “No Objections Notice” is applied for and obtained from the China Securities Regulatory Commission; 3) Various financial statements are submitted to the Listing Department of Hong Kong Exchanges & Clearing Ltd to obtain an audited verification report from a designated Hong Kong accountancy; and, lastly 5) Approval is given by the Listing Committee.
Euro-Asia Agricultural Holdings was listed in Hong Kong on July 19, 2001, with its IPO price set at HK$1.48 per share. A total of 460 million shares were issued for the initial public offering, and the deal was 78 times oversubscribed. On August 1, Euro-Asia Agricultural Holdings placed an additional 60 million shares. From these two share offerings, it received nearly HK$700 million in proceeds. The 1.2 billion shares held by major shareholder Yang Bin had a market value of HK$1.8 billion.
On January 2, 2002, Far Eastern Economic Review published an article questioning whether Yang Bin had embezzled funds from the listed company to invest in private real estate projects. Fund managers rushed to dump their shares in Euro-Asia Agricultural Holdings and the share price dropped by 24 percent. Yang Bin held a press conference in Hong Kong on January 5 to clarify his investments in Holland Village.
On April 11, 2002, Euro-Asia Agricultural Holdings published its 2001 annual report stating that net income had increased by 1.73 times to 520 million yuan, a considerably better performance than predicted in the listing prospectus.
On April 18, 2002, Yang Bin sold 0.23 percent of his old shares to Itochu. The market was concerned that Yang Bin might reduce his shares further to raise cash.
On May 31, 2002, because Euro-Asia Agricultural Holdings was unable to wire money from mainland China to Hong Kong in time to pay off its short-term loan of HK$118 million, Yang Bin pledged his 604 million shares to Citic Capital Market.
On July 12, 2002, Shanghai International Finance News reported that Yang Bin reportedly had disappeared to evade taxes. This report resulted in a further drop in Euro-Asia’s stock price. Yang Bin had little choice but to show up in Hong Kong on July 14 and make an explanation to the media in person.
On August 7, 2002, Yang Bin announced that he was selling 300 million of his shares to two independent investors at HK$1.35 per share to raise HK$400 million in cash. Funds managers and institutional investors considered this a “failure to keep his earlier promise not to reduce his stake,” and this triggered another 12.4 percent drop in stock price.
On September 19, 2002, trading in shares of Euro-Asia Agricultural Holdings was suspended just two minutes after the market opened in a rare intervention by the Securities and Futures Commission. This intervention was related to the resignation of Chen Jun, the CEO of the listed company.
On September 30, 2002, trading in shares of Euro-Asia Agricultural Holdings was suspended once again because Yang Bin underreported the actual number of shares he sold. These shares are still suspended.
On October 7, 2002, the Hong Kong Economic Times reported that the China Securities Regulatory Commission had sent a letter to the Hong Kong Securities and Futures Commission on September 29, pointing out that Euro-Asia Agricultural Holdings (0932), listed on the Main Board of Hong Kong Stock Exchange, was suspected of six counts of securities regulation violations.
The six counts were as follows: 1) Total capital of foreign-owned firms under the Euro-Asia Group should total US$160 million, but no capital injection whatsoever was found. Therefore, its Capital Verification Report was suspected of being falsified; 2) From 1998 to 2000, Euro-Asia Agricultural Holdings claimed annual revenues of 2.1 billion yuan. But according to investigations by the National Taxation Bureau, the company’s total annual revenue was in fact less than 100 million yuan; 3) Euro-Asia Agricultural Holdings was suspected of illegally altering land use; 4) Cash totaling 200 million yuan had mysteriously disappeared; 5) There were suspicions that tax proceeds of 330,000 yuan had been stolen and an additional 14 million yuan in tax payable was overdue; and, 6) Euro-Asia Agricultural Holdings was suspected of providing false documents and falsifying its Capital Verification Report.
Perhaps most surprising was its hugely inflated revenue claim. “Euro-Asia Agricultural Holdings claimed total revenue for the period of 1998 to 2001 was 2.1 billion yuan. But according to investigations by the China National Taxation Bureau, its total revenue, including that of all non-listed entities held by its parent company, was less than 100 million yuan.”
At this point, the share price of Euro-Asia Agricultural Holdings collapsed from a peak of HK$2.80 per share in May to HK$0.38 per share before suspension. Investors lost all confidence in Euro-Asia Agricultural Holdings.
On October 10, the Hong Kong Securities and Futures Commission and Hong Kong Exchange & Clearing Limited sent a letter to intermediaries ICEA Securities and Arthur Anderson & Co, which sponsored the listing of Euro-Asia Agricultural Holdings, enquiring about the accuracy of the information in its IPO prospectus.
From a series of events surrounding Euro-Asia Agricultural Holdings on the Hong Kong stock market in 2002, we can see a tip of the firm’s “iceberg” had begun to surface.
In the prospectus, Euro-Asia Agricultural Holdings was described as an industrialized flower and agriculture firm employing advanced biotechnology to cultivate and produce flowers and agricultural products. It was not only a key domestic supplier of both seedlings and mature moth orchids (Phalaenopsis) and large-bloom orchids (Cymbidium hyridum) to Chinese buyers, but it also exported these products.
According to the financial statements of Euro-Asia Agricultural (Holdings) Company, its total revenue between 1998 and 2002 reached 2.82 billion yuan, with profits of 1.07 billion yuan. Before public listing, all revenue was generated by flower sales. But beginning year-end 2001, vegetable output rose sharply and flower sales dropped to 90 percent of the total revenues (998 million yuan). During the first half of 2002, revenue from flower sales accounted for 83 percent of the total revenues (657 million yuan).
According to the IPO prospectus, production of flowers came from “seven production bases” located in the provinces of Liaoning, Jilin, Shandong, and Hebei. (3)
Reporters from China’s Caijing magazine personally conducted a survey of the business partners, contracts, land area, and rental expenses of Euro-Asia Agricultural (Holdings) Company at the locations of the bases specified in the prospectus.
According to their survey, Shenyang headquarters (Holland Village), and production facilities in Shenyang’s Zaohua and Dalian were basically as described in the prospectus. But the facts on the ground in Changchun, Hebei’s Gu’an and Shijiazhuang, and Shougang in Shandong were at odds with the prospectus.
The “Changchun Base” covered six hectares of land at Xiaoheyan Village, according to the prospectus. Beginning May 25, 2001, the land was rented at an annual cost of 175,000 yuan, and the rental agreement was to run 20 years.
“Xiaoheyan has been officially integrated into the Jing’an Development Zone. In the village, this reporter couldn’t find any trace of a flower production base. As a matter of fact, there was no farmland in this village any more. Both the Management Committee of Jing’an Development Zone and Xiaoheyan Village Committee of said they had never heard of anyone renting a piece of land here to grow flowers.”
“From earlier media coverage,” continues the report in Caijing, “we know that around 1997, staff from Holland International Trade Company, the parent company of Euro-Asia Agricultural (Holdings) Company, did come to Changchun looking for investment opportunities. However, the location was in Shuangyu Town (Chaoyang District). They planned to establish a ‘model high-tech agriculture zone by introducing greenhouse equipment from Holland’. The first stage of the construction work on the model zone was completed in 2001, but there was no further mention of Holland International Trade Company anymore in the news. The developer of that demonstration zone was Jilin Province Guolian Company, a local company.” (4)
The Gu’an Base in Hebei, according to the prospectus, was a four-hectare piece of land rented from the Liuquan Village Committee (Niutuo Town, Gu’an). The 20-year lease began May 25, 2001, for an annual rent of 150,000 yuan.
According to Caijing’s report, there was no Liuquan Village in Niutuo Town. Instead, Euro-Asia Agricultural’s “base” was located in Lincheng Village. Within its total area of 1.3 hectares were a one-hectare large shed with computerized temperature control, two large self-built sunshine greenhouses, and one showroom.
In fact, the site belonged to Gu’an Euro-Asia Qianhui Flowers Co. Ltd., which was jointly established in 1997 by Beijing Euro-Asia Flowers Co., Ltd. and Wu Haijiang, a local entrepreneur who owned Baimu Qianhua Factory. Beijing Euro-Asia owned 51 percent of the shares in Gu’an Euro-Asia Qianhui Flowers, and Gu’an Baimu Qianhua Factory the remainder.
“Wu Hai-Jiang told Caijing that from 1997 to 2001, Beijing Euro-Asia invested hundreds of thousands of yuan in Euro-Asia Qianhui, as well as equipment and seedlings worth over one million yuan. During that period, Euro-Asia Qianhui’s products were exclusively distributed by a third party. Partly due to a lack of investment capital, production was limited and there were virtually no profits.
“On March 2001, Shenyang Euro-Asia Agriculture Development reached an acquisition agreement with Baimu Qianhua Factory, whereby the former agreed to buy Euro-Asia Qianhui’s shares as well as the remaining assets of Baimu Qianhua Factory that had not been injected into the joint venture. Henceforth, Baimu Qianhua would become a dedicated production base serving Shenyang Euro-Asia in Gu’an. Euro-Asia Qianhui would be renamed as the ‘First Production Base of Gu’an Euro-Asia’ under Shenyang Euro-Asia Agriculture Development Co., Ltd. However, this acquisition has not been realized to date.” (5)
And now for the “Shijiazhuang Base,” described in the prospectus as covering three hectares of land leased for 20 years, beginning January 1, 2001. “In the production base at Shijiazhuang, the reporter saw a large one-hectare glass greenhouse filled with chrysanthemums. There were also 24 sunshine greenhouses, each covering 500 square meters, where a few orchids could be found among what were mainly common flowers. The total area was 2.2 hectares, slightly different from the three hectares described in the prospectus.” (6)
“Shandong Shouguang Base,” according to the prospectus, was located in Hanqiao Village (Luocheng Town, Shouguang City), covering three hectares of land with an annual rental fee of 100,000 yuan. In fact, Luocheng consists of Hanqiao East Village and Hanqiao West Village, neither of which leases out land for flower cultivation.
But there was another flower supplier in Luocheng, Wanfang Flower Center. “The president of that company, Wang Tong-Lin, told Caijing that Wanfang Flower did formerly cooperate with the Euro-Asia Group. In 1996, the two companies signed a contract. Wanfang provided 5.8 million yuan to Euro-Asia Agriculture for the purchase and delivery of imported seedlings and equipment, and the contract was realized in 1997. At that time, Euro-Asia did express its intention to establish a joint venture with us. But in the end, it was never realized.” (7)
We can see from Caijing’s in-depth report that only three of Euro-Asia Agriculture’s seven “production bases” were as described in the IPO prospectus. Another two sites—in Shougang and Changchun—were potential projects that were never finalized. And actual land under cultivation in the remaining two bases was 12.6 hectares less than stated in the prospectus.
So, what did Euro-Asia Agriculture have to say in the face of Caijing’s findings? With Yang Bin under interrogation and Deputy President Li Gang and Vice-president Liu Gui-Feng both under house arrest, I was unable to find out.
The public listing of Euro-Asia Agricultural (Holdings) Company involved many parties—sponsors, securities brokers, financial institutions, China-based legal firms, the China Securities Regulatory Commission, Hong Kong Exchanges and Clearing Limited, accounting firms in Hong Kong, and the Listing Committee. I have no way of knowing if any part of this process was problematic. But if there was anything wrong, I am afraid that the above-mentioned institutions and companies should take a certain responsibility.
The outlines of what has become the “Yang Bin Affair” have gradually become clear. But just how widely did it reach, and how deep was it? I am afraid we must wait for the results of the investigation by China’s legal authorities.
We should have faith that China’s system of law is fair, open and transparent. It will definitely furnish a clear answer to readers’ questions about the “Yang Bin Affair”.

Footnotes:

1. From my interviews with Wan Shou-Hai in Shenyang in July and August 2002, and reconfirmed on Oct 22, 2002.

2. Source: Files of the Liaoning Provincial NPC Standing Committee regarding “Key illegal land cases”.

3. Refer to the prospectus of Euro-Asia Agricultural (Holdings) Company.

4-7. Refer to the article “The Truth about Euro-Asia Agricultural (Holdings) Company,” by Li Qing, He Yu-Xin and Yu Ning. Caijing magazine. (Issue 20, 2002).