Steel Mill Chairman Sentenced, Released

飞雪寒冰

After five years' detention, Dai Guofang, chairman of the private sector Jiangsu Tieben Iron Co., accused of evading tax to the extent of 23.9 million yuan was set free by a court on April 17 as the five year sentence awarded to him was already over.



The Changzhou Municipal Intermediate People's Court sentenced Dai and Zhang Xiqing, the company's deputy general manager, for five years in jail for evading 23.9 million yuan tax by forging receipts. Six other officers of the company were also sentenced for one to three years imprisonment. The company was fined 400,000 yuan.



All defendants were released after the sentence as their jail terms had already been fulfilled since their detention.

飞雪寒冰

The court said it gave a light verdict as the company had paid the evaded tax before the case was uncovered. Defendants are unlikely to appeal against the verdict.



Dai and other defendants were detained for tax invasion in April 2004. At about the same time when they were detained, work on the iron project of the company in Changzhou was halted by the central government, which dubbed it a problematic expansion. Officials from nine ministries launched a probe into the company and soon determined that Dai and other executives, in their push for progress, had violated several rules, including those governing land-use rights and financing.



The official Xinhua news agency published a long list of Tieben wrongdoings released by government investigators. But many were actually problems tied to local government officials who had gone around skirting central government land and lending rules, subdividing land and issuing project loans based on small, individual plots.



The court case against Dai led to a complicated and opaque trial that opened in March 2006. By then, prosecutors had reduced the charges to forging receipts for evading taxes, punishable by up to 10 years in jail.

飞雪寒冰

The crackdown on Tieben Steel came when the central government sought to rein in blind investments in a bid to prevent overcapacity and economic overheating. One of the government measures called for halting certain rapidly expanding private companies from undertaking overzealous development plans.



Regulators considered many of the smaller mills, including Tieben, superfluous. Tieben was built with tens of billions of yuan on 1,196 acres of former farmland. Its production plan called for an annual output of 8 million tons of steel.



The government’s sudden, tough crackdown on the Changzhou business had a chilling effect on private enterprises across China. Entrepreneurs got the message, and the economy started slowing down.



But the economic climate has been changing since then. Over the five years after Tieben’s shutdown, the economy has switched direction. No longer overheating, the economy now faces a rapid slowdown, prompting the central government to loosen macroeconomic controls. Now the government has turned to partnerships with private steel mills to revitalize the economy.