Changxing’s fall marks the end of an era

published 28 May 2012

When China's 'Bandit King', Lai Changxing, fell in 1999, "he took 10,000 officials with him", says The Sunday Times. Thousands of his associates were detained; 14 were sentenced to death, including the minister for borders and the head of military intelligence. His older brother died in prison. "Only Lai got away." This week his chickens finally came home to roost.

After a 12-year legal battle to extradite him from Canada, Lai has been jailed for life for smuggling and bribery (a condition of his handover was that the death penalty was waived). Many in China think he got off lightly. Lai cultivated an image as a Robin Hood figure, but, according to the People's Daily, this illiterate crime boss was the most corrupt man in over 60 years of Communist rule.

At his peak in the 1990s, Lai ran the port city of Xiamen like "a personal fiefdom", says The Independent. His smuggling empire turned over £2.64bn between 1995 and 1999, diddling China out of £1.36bn in taxes. "Apparently operating with impunity", Lai became China's biggest private trader of cars and cigarettes, importing one sixth of its oil.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

The key to business in China's fledgling capitalist economy, Lai believed, was bribery. And the key to bribery was sex. An expert bordello keeper, he ran the Red Mansion a seven-storey establishment, "in which government officials were treated to differing levels of hospitality depending on their rank", says The Times.

His recruiters scoured China for girls, who later described "a continuous stream of People's Liberation Army colonels and generals" heading into the Red Mansion's steamy Jacuzzis. For larger parties, Lai built a $20m replica of the Forbidden City in the hills outside Xiamen, packing it with modern-day concubines.

Born in 1958, one of eight peasant siblings, Lai was often hungry as a child and received no formal education. At 20, he started making car parts. As business took off, officials demanded bribes, says The Sunday Times. When Lai refused, his sister was beaten. He "never refused another official" instead, "he exceeded their expectations".

By the mid-1990s, he'd amassed so much cash he hardly knew what to do with it. He built football stadiums, gave huge wads to any taxi driver fortunate enough to cross his path and, in 1996, constructed a vast terminal building for the local airport.

His downfall came in 1999 when he uncharacteristically refused to bribe an official, who shopped him and the entire ring to the authorities. Lai fled with his family to Canada, where he began "a long game of cat and mouse" with the Chinese government.

"He should be killed three times and even that wouldn't be enough," said the Chinese PM at the time. As he starts his life sentence, Lai Changxing might reflect that, on that score at least, he's still ahead.

Changxing's fall marks the end ofan era

As a founding member of China's "newly minted class of oligarchs", Lai's wealth gave him unheard-of powers in a still nominally communist country, says Oliver August, author of Inside The Red Mansion: On The trail Of China's Most Wanted Man, in The Sunday Times. "He succeeded where others failed because he understood the fundamentally haphazard nature of a land perched between total command and a free-for-all market".

The operations of his company, Yuanhua, were homespun. "Barely able to decipher his own business card... Lai refused to engage in correspondence of any kind." Business plans were unheard of and there was "no hierarchy other than the link that every one of his employees had with him".

Lai's case sparked the largest criminal investigation in Chinese history. Revelations, including cabaret entertainment of rouged Red Guards goose-stepping to The Sound of Music, "rocked the trading hub of Xiamen and continue to reverberate", says Leo Lewis in The Times. Lai's web of influence stretched into families of China's most senior leaders, including Politburo member Jia Qinglin.

Yet he mocked the establishment, hamming it up as a decadent Ming emperor in his replica Forbidden City. Visitors were greeted with a banner quoting Mao ("Strengthening socialist spiritual civilisation is the great strategic goal") and Lai on a gold-bedecked throne next to a beer umbrella.

Beijing's persistence in bringing Lai to justice shows its "determination to combat corruption", says China Daily. Yet, "the problem remains rampant", says The Guardian. Lai claims he was "unfairly targeted" for merely doing what many others did "to get ahead without elite connections".

But while he's been absent, China has changed immeasurably. Corruption may linger, but not on the scale he practised it. "Lai belongs to a dying era: the infancy of modern China's rise," concludes Oliver August. "It's doubtful there will ever be another Lai Changxing."