China Securities Journal, the official newspaper of the Chinese securities regulator, said Zhou Zhengyi, with a personal wealth of US$320 million according to last year's Forbes list, is alleged to use bank loans illegally to invest in stocks and to conduct corporate restructuring involving his listed companies.

The 42-year-old Shanghai native, also known as Chau Chingngai in Hong Kong, is also suspected of issuing fraudulent tax receipts and overstating revenues through his complex and complicated affiliated units, the paper said.

Zhou is currently the president of Shanghai Nongkai Development Group, which actually controls four listed companies in Shanghai and Hong Kong. He is involved in the agriculture, real estate, expressway construction, trade and finance businesses.

The two firms listed in Shanghai are property developer Shanghai Hainiao Enterprise Co Ltd and Daying Modern Agricultural Holdings Co Ltd. The two in Hong Kong are Shanghai Land Holdings Ltd and Shanghai Merchants Holdings Ltd.

Nongkai Development Group, which started in 1997 with a registered capital of 100 million yuan (US$12 million), reported total assets of 2.33 billion yuan at the end of 2001.

The company, which is believed to have under its umbrella a complicated litany of subsidiaries, lost 2.25 million yuan in 2001.

At a press conference held by the Shanghai municipal government on Tuesday, spokeswoman Jiao Yang said Zhou's Nongkai Group was being investigated for questionable business operations.

There was no official comment from the company, however a receptionist at Nongkai denied reports that government officials were at the offices to check its books.

"I don't see any person here as you described. Everything is going on as normal," said the receptionist. She refused to give her name.

Mo Yuk-ping, Zhou's wife and chairman of Shanghai Merchants Holdings, was also questioned by Hong Kong's Independent Commission Against Corruption.

Reports from Hong Kong said Mo has been freed on bail of HK$10 million (US$1.3 million). But official confirmation was not immediately available.

Share trading in Zhou's two listed units in Shanghai were suspended yesterday pending the release of important statements.

On Tuesday, yuan-denominated Class A shares in Shanghai Hainiao dropped 4.61 percent to 10.13 yuan and shares of Daying Modern Agricultural closed 5.26 percent lower at 9.71 yuan.

(Shanghai Daily June 5, 2003)