Rich businessman is held for allegedloans irregularities

Shanghai tycoon Zhou Zhengyi (周正毅), one of China's wealthiest businessmen, has been detained by authorities in the country's biggest city for alleged loan irregularities, state press reported yesterday.

Authorities were holding Zhou, chairman of Shanghai Land Holdings and Shanghai Merchants Holdings, for investigation by the China Banking Commission and the Central Commission for Discipline Inspection of the Communist Party, the 21st Century Business Herald reported.

Zhou, also head of Shanghai-based Nongkai Development Group, is notably linked to the vice-chairman and chief executive of the Bank of China in Hong Kong, Liu Jinbao (劉金寶), who was removed from his post last week.

Newly appointed chairman of the Bank of China in Hong Kong, Xiao Gang (蕭鋼), was quoted by Hong Kong media as saying Liu's transfer back to Beijing was only part of a normal rotation.

State press reported otherwise, saying Liu's removal was in fact connected to 1.5 billion yuan to 1.7 billion yuan (US$181 million to US$205 million) in loans he approved that allowed Zhou to buy stakes in Shanghai Land and Shanghai Merchants.

Although Liu was then serving as general manager of the Shanghai branch of Bank of China, such activities violated regulations because Zheng was not a qualified borrower, the China Business Observer said.

Officials at the Banking Commission contacted by reporters denied any knowledge of an investigation into Zhou's financial transactions.

The two companies furthermore denied legal action had been taken against Zhou, but said the Shanghai native used 2.29 billion shares -- a 75-percent stake -- in Shanghai Land and 182 million shares or a 44.1-percent stake in Shanghai Merchants as collateral for the new loans.

Zhou, who ranked 11th last year on Forbes magazine's list of the 100 richest people in China, reportedly also owes the Bank of China in Hong Kong some 800 million yuan in loans that will mature next month.

The 42-year-old is also engaged in a major dispute with more than 10,000 residents concerning relocation costs related to a property development project signed with the Shanghai city government last May.

They claim to have been rendered homeless after Zhou's company, Hong Kong Jiayun, failed to furnish proper compensation, sources familiar with the situation said.