Another UK-China ‘deal’ on ice amid secrecy and confusion
Chengdu tycoon Wang Chunming reportedly entered a £1 billion 'partnership' with Sheffield in July 2016. Now it's unclear who exactly the English city's deal was with, or if it is worth the paper it may or may not have been written on
A week is a long time in politics, goes the much-used British phrase. So how about 60 years?
In July 2016, when the northern English city of Sheffield announced a headline-grabbing £1 billion (US$1.35 billion) deal with Sichuan Guodong Construction Group, a business from the western Chinese city of Chengdu, the council proudly spoke of a “60-year commitment”.
That’s an unusually long period for a commercial relationship. In reality, the time-frame is far from being the most puzzling thing about this “partnership,” however.
More than a year on from the announcement of the deal, there is confusion over how and why the focus changed from a project that was going to “transform the city’s downtown” to one that would instead turn Sheffield’s art deco Central Library into a five-star hotel. There’s also bewilderment about which Chinese company actually signed the deal – not to mention what that deal involved and whether it was even signed at all. And there are connections linking the Sheffield affair and one of the biggest corruption and political scandals in modern Chinese history, and to a US$557 million international fraud case. And after all the fanfare from Sheffield City Council last year, it has pretty much gone silent.
Sixty years ago, Sheffield was still in its industrial heyday and globally famous for its steel. Conversely, Chengdu was – like the rest of China – attempting to rebuild after decades of war, bitter civil unrest and revolution. But places change with time. From the 1950s onwards, Sheffield slipped into decades of decline. For its part, Chengdu would go on to become Western China’s industrial powerhouse.
The plethora of enthusiastic headlines around the deal last year indicate just how welcome such feel-good economic news was in Britain. After all, the announcement came just weeks after the country’s landmark decision, in a referendum, to leave the EU. Sheffield’s councilors certainly seemed pleased with themselves.
Council Leader Julie Dore, writing in Britain’s New Statesman magazine, boasted of her administration being at the heart of a myriad of collaborations with China. She wrote about benefits for “future generations” and how these connections had “culminated in a landmark partnership with Sichuan Guodong Construction Group, a Chinese conglomerate with numerous interests, which is listed on the Shanghai stock market.”
But Sheffield City Council had not entered into a partnership with any entity listed on the Shanghai stock market. Sichuan Guodong Construction Group is a private entity. Is it possible that Dore had just made an honest mistake about a company with which the council had just signed a 60-year, billion-pound deal? Maybe.
Beyond the spin
Businessman Wang Chunming owns Sichuan Guodong Construction Group. He did also, at one time, hold the majority stake in the similarly-named Sichuan Guodong Construction Co Ltd, a publicly listed mainland Chinese company of which he was Chairman. Sichuan Guodong Construction Co Ltd was a manufacturing conglomerate with the Shanghai Stock Exchange share code 600321.
One presumes Julie Dore must have been familiar with the listed entity, because the council had previously announced, in October 2015, that it had a memorandum of understanding with that company.
Why, then, it signed its “groundbreaking” deal eight months later with Mr Wang’s private company has never been explained by the council.
Wang Chunming himself told the BBC, in July 2016, that “the main problem was if we had used our PLC to invest, the red tape would have been too complicated and time-consuming.”
What is certain is that Sichuan Guodong Construction Co Ltd no longer exists. Its name disappeared as part of the 2016 takeover and its Stock Exchange share code is now used by Rightway Holdings Co., Ltd
What he failed to mention was that the board of Sichuan Guodong Construction Co Ltd told the Shanghai Stock Exchange in June 2016 – before the Sheffield announcement – that all existing agreements with Sheffield City Council had been canceled.
Nor did he reveal that Sichuan Guodong Construction Co Ltd was contesting a US$20 million lawsuit from a supplier, or that it had suffered significant losses in the first half of 2016. In fact, all trading in the company’s shares had been suspended on May 6, 2016, as it entered into an “asset exchange-based restructuring plan” that would see Wang lose his controlling share to Rightway Group, a Chengdu-based property company.
Rightway is a company with an interesting background. The controlling stake is held by Fu Yanbin, who, in 2008, ranked on Forbes China’s rich list and has been in the news many times since.
Between 2013 and 2016, he has been taken to court in Hong Kong, the Caymans, and the British Virgin Islands by a consortium of lenders, including Goldman Sachs, for allegedly transferring assets out of the consortium’s reach after Rightway failed to repay a US$557 million loan. US magazine Quartz called the allegations “another example of Chinese corporate chicanery.”
Rightway and Fu Yanbin have also been repeatedly associated in Chinese media with the 2013 political, corruption and sex scandal that swirled around the arrest and subsequent jailing of rising political heavyweight Bo Xilai. Chinese media have written that Fu received assistance from Bo when Rightway was formed and – although never convicted – he was reported to be “detained” for many months, if not years, by Chinese authorities after Bo’s own arrest.
To add to the intrigue, Bo first became involved in politics in China’s eastern Liaoning province, before moving to Sichuan in China’s far west. It became a feature of his trail that many who were associated with him made the same East-West journey. Rightway’s Fu Yanbin started in Dalian, the capital of Liaoning, before moving to Chengdu. And so did Wang Chunming, who previously held senior positions in Angang Steel, a Liaoning-based former state-run enterprise.
It’s hard to know if this is all a coincidence. It’s also hard to know why, in the middle of the development deal with Sheffield, he sold out to Rightway. Wang would not talk to Asia Times. His office phone, after repeatedly ringing out, was finally answered by a man who said, brusquely: “we don’t welcome media interviews.”
What is certain, however, is Sichuan Guodong Construction Co Ltd no longer exists. Its name disappeared as part of the 2016 takeover and its Stock Exchange share code is now used by Rightway Holdings Co., Ltd. Another certainty is that it’s not just Wang Chunming who is not happy to talk.
Sheffield City Council is no longer in a mood to discuss either the deal with Wang or the entities he has had links with. When pressed, a spokesman told Asia Times, in a written statement, that the background to Rightway Group is “all publicly available and does not relate to Mr Wang or the Sichuan Guodong Group, but to a company that he sold an equity stake to last year,” adding that “This is potentially one of the largest, most ground-breaking and innovative deals between a UK city and a Chinese multi-national company and that doesn’t come without its challenges, but the council is committed to exploring it fully.”
The Council also told Asia Times that due diligence into Wang Chunming was carried out by the British government in London. The Ministry responsible, the Department for International Trade, was similarly tight-lipped when approached. “To help facilitate commercial discussions between Sheffield City Council and Sichuan Guodong Construction, DIT conducted checks on the company’s development track record and market capital to assess their ability to make significant investments in Sheffield,” is all it would say.
Both the DIT and Sheffield Council now repeatedly refer only to “Sichuan Guodong Construction.” That could be an error – or it could be a neat way of avoiding the need to make a distinction between the two “Sichuan” entities that have been associated with Sheffield.
Today’s Sheffield boasts an array of on-going developments and an impressive clutch of high-tech businesses, and it certainly has plenty of other Chinese associations. Sheffield University’s Advanced Manufacturing Research Centre is a key partner in China’s space program, while its city-center “Digital Campus” IT hub received £40 million in funding from China’s Hualing Industry and Trade Group.
Hualing also has close commercial ties with Sheffield United Football Club, whose owner, the entrepreneur Kevin McCabe, has been doing business in Sichuan for two decades. These connections saw Sheffield “sistered” with Chengdu in 2010.
“The Council were desperate to attract investment from outside the city. As a result of that, they have become blind to the risks, and it’s become clear there are significant risks”
Fittingly, the city has a decent-sized Chinese community. Sheffield is home to something like 60,000 students, and young Chinese are a visible presence, something that the downtown “New Era” development is ready to capitalize on. Comprising high-end student apartments, a Chinese-UK “business incubator” and a swanky Asian supermarket and adjoining food court, New Era is due to be completed next year. The project is fronted by Jerry Cheung, who came to Sheffield from Hong Kong when he was a teenager and speaks English with a strong local twang.
Cheung first worked in the steel industry, then owned a string of restaurants in the city. He says he has raised investment from China for New Era and is effusive about how the development will become a “regional hub” for Chinese business and social activity. He is more guarded, however, when talking about Sheffield City Council’s Chinese partnership.
“Look,” he says, with a characteristic laugh, “if a guy comes here and says he is going to drop a billion pounds over 60 years, you have to wonder.” He laughs again. “If you think something’s too good to be true, well, normally that’s because it is.”
Others in Sheffield are more forthright. Douglas Johnson, a Green Party councilor in Sheffield, says the council executive has been repeatedly asked for details and updates with regard to the Sichuan Guodong deal but that questions have been stonewalled. “The Council were desperate to attract investment from outside the city,” says Johnson. “As a result of that, they have become blind to the risks, and it’s become clear there are significant risks.”
Johnson allows that the problem may be one of inexperience. “I’m not really convinced the council has the capability to negotiate such deals in the same way that a commercial company would have.” Another councilor, who spoke on condition of anonymity, said: “We really wanted to support this. We support what is good for Sheffield. But it’s become clear that there is something very wrong here.”
Nicholas Smillie, who helped set up a grassroots campaign to halt Sheffield Central Library’s conversion into a hotel talks about “a shameful episode” for the council. “In its haste to give away one of the city’s few great buildings,” he says, the Council “has repeatedly resorted to misleading the public… and now it seems its deal-making was also hopelessly naive.”
A common local complaint has centered around Wang Chunming’s lack of a track record in the UK. But that is not entirely the case. In the days when he was happier with publicity, he told local media that he had chosen Sheffield because his daughter Emily studied there. She also found her husband in Sheffield: Dylan Liu studied hotel management in the city. Perhaps that is how Wang got his motivation for a five-star hotel. It certainly appears to be his first “business” connection in the city.
In 2013, Dylan Liu opened an establishment promising to be “Sheffield’s finest Karaoke experience”. He took up a 20-year lease in an award-winning warehouse conversion but, unfortunately, the OneNineTwo quickly failed, and British Companies House records show it was wound up in 2016, with its goods and assets being effectively seized by the government. It’s not entirely clear why the business didn’t work. Perhaps Sheffield just wasn’t ready for karaoke. But things change. Let’s give it 60 years or so.