Chinese Businesses Busted in Russia and North Korea

A Zhejiang businessman asked the central government to intervene when his forest harvesting farm was confiscated by the Russian government.

Mr. Fu Jianzhong a forest farm in Russia in 2003. According to the news report by 21CN, Mr. Fu obtained the operation of the farm through a stock transfer (no money involved). A RMB 230 million ($40 million) loan from the Chinese National Development BanK was used to improve infrastructure. At the same time, due to price change on the international market, value of the farm raised from RMB 7 billion ($1.2 billion) to RMB 15 billion in 3 years.

Fu's trouble started when a driver was stopped for stealing stock from another farm. The Russian authority found the driver worked for Fu's farm. Fu disputed the accusation. Four more charges were thrown at Fu's farm, citing varies violations in operation. Russian taxation authority forced a bankruptcy because of back taxes.

Within a few month, Fu was severed from the farm, and as a result, 'Ten Billion Estate Vaporized.'

This incident mirrored a case in North Korea. Mr. Zhou Furen claimed he lost RMB 240 investment in a mine he operated in North Korea, after the mine was taken over by the Korean government.

Zhou signed a contract with a Korean firm in 2006 to set up a joint venture. Zhou holds 75% share with technology, management and cash valued Euro 36 million. The Korean side gets 25% with mine valued Euro 12 million.

The project was completed in April 2011. One hundred fifty Chinese workers worked along 500 Korean workers. Projected revenue was RMB 5 billion per year.

Things turned the opposite way in June, when the Korean side piled up new fees and profit sharing demands. When Zhou attempted to fight back with suspension of production, Korean workers who had already learned the rope restarted the mining on their own.

Korean authorities accused Zhou's venture started operating without many required approvals. Also, many documents including contracts and approvals were forged. Zhou disagree with the findings, but said it would be impossible to prove one way or the other due to the gray area in which his company was operating because of Korea's political status.

Both cases took place in extreme high-risk areas where corruption are abundant under volatile political systems. Both cases involved natural resource that Chinese business obtained at unreasonable low price. Mr. Fu paid literally nothing for a forest farm worth in his own words US $2.5 billion. Mr. Zhou paid some labor cost and electricity bills for a mine which in his own words could bring US $900 million net profit a year. In both cases, the companies were taken away by foreign governments moment after they were fully operational. In both cases, the accusations employed by foreign governments were shady at best, but the Chinese businesses still had trouble to prove their own innocence.

Now, the billion dollar question is: what are they complaining about?