One Billion Customers - James McGregor [59]
Wrong Place, Wrong Time
In the late 1990s, China was awash in a smuggling epidemic. The nation’s economy had boomed throughout the 1990s, but Chinese customs revenues remained anemic. Even multinational companies manufacturing consumer products in China used smuggling networks to distribute their products in China because they were faster and cheaper than the domestic state-owned distribution monopolies. The smuggling hit hardest at China’s oil industry. The controlled domestic oil price was almost double the going international rate and the government estimated that at least one-third of China’s oil supply was smuggled into the country, mostly by the military and police. Because the People’s Liberation Army is under the jurisdiction of the Communist Party, not the government, even top government officials often were afraid of confronting military officials, especially in the provinces. Protected by their party status, military and police units were fully caught up in the gold rush. In any given town the karaoke clubs, girlie bars, sauna and massage parlors, and brothels were inevitably in military- or police-owned buildings. The top luxury cars in town belonged to military officers and their families, conspicuous by their distinctive white license plates.
In March 1998, Premier Zhu Rongji came into office, determined to crack down on smuggling and get the military out of business. It had been one of his favorite causes as vice-premier, albeit a lonely one. The military had fiercely opposed the vice-premier, arguing that it needed income from business to supplement inadequate funding by the government. While still vice-premier, Zhu gathered evidence of Lai’s Yuanhua smuggling operation and its ties to the military. He took that evidence to Admiral Liu Huaqing, who was vice-chairman of the party’s Central Military Commission. But Admiral Liu knew Lai through Liu’s daughter, who worked for a navy company that partnered with Yuanhua in some smuggling operations.
Liu told Zhu to back off. “Little Lai is not bad at all,” he said.
Now, as premier, and with the explicit public backing of President Jiang Zemin, Zhu was looking for the big case that he needed to expose the extent of smuggling and the connections between smugglers and the police and military. Early in 1999 he found it.
Lai Changxing says his undoing started with one of the hundreds of associates he had in various enterprises early in 1999. Here is his version of events: Zhu Niuniu, who manufactured fake Kodak film, partnered with Lai in some smuggling operations. But Zhu wasn’t a particularly reliable partner. Working through a defunct company that he had owned in partnership with Lai, Zhu borrowed some $1.8 million from a company owned by the Chinese military. To get the loan, he forged Lai’s signature. A chronic gambler, Zhu lost the money and began pressuring Lai to help him repay it. Lai, tired of his erstwhile partner’s screwups, refused. An enraged Zhu tried to blackmail Lai, who brushed him off. Then Zhu prepared a seventy-four-page report on Lai’s smuggling, naming officials who accepted bribes from Lai. As Lai tells it, the report was full of fabrications. Zhu sent the report to officials in Xiamen, where Lai’s friends promptly kept it under wraps. Then Zhu sent the report to the Communist Party’s Central Commission for Discipline Inspection. To insure that it got into the right hands, acording to Lai, Zhu Niuniu paid a $3,500 bribe.
On March 29, 1999, the details of the Zhu Niuniu report were passed on to the party leadership. With evidence implicating Lai and Vice-Minister Li, Premier Zhu finally had the big case he needed, and a chance to cripple a huge smuggling operation while exposing corruption at the highest levels of the police and military. Events began to move quickly. The investigation officially began on April 20 when President Jiang Zemin created the