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On July 31, 2019, the twelfth round of high-level economic and trade consultations between China and the United States had just come to an end, and the U.S. Department of Justice suddenly released a 53-page indictment.
Tax evasion, money laundering, fraud...... As many as 24 criminal felonies are involved in the lawsuit, each of which is enough to spend 20 years in prison, with a maximum sentence of 465 years if convicted.
What is even more bizarre is that the target of the prosecution is actually a Chinese.
This man's name is Liu Zhongtian, who used to be the richest man in China, but not many people in China today remember this name, as well as the Zhongwang he created - the Chinese company that robbed Americans of jobs and made the U.S. government jump on its feet.
Liu Zhongtian's vision
In 1978, the spring breeze of reform and opening up was about to blow all over China, and countless people's brains were activated at once. Some people have resources in their hands and are invincible; Some people have unique insight and rise in the end. Liu Zhongtian belongs to the latter group.
Liu Zhongtian, who was just 14 years old that year, scraped together the money on his body, a total of 200 yuan, and then he used the money to start a timber business in Changbai Mountain.
There is no technical threshold for the timber business, Liu Zhongtian's business is getting bigger and bigger, and there are more and more competitors, and Jiangsu and Zhejiang merchants gradually occupy the local timber market.
In the 80s, the steel industry in Northeast China was still in decline, so he switched to the chemical industry and supplied refractory coatings to steel mills. In the early 90s, when the cement factory was prosperous, he set up a "Cheng Cheng Plastic Weaving Factory" to produce woven bags for several local cement factories.
While struggling in the supporting industries of these fashionable industries, Liu Zhongtian is also looking for greater business opportunities.
In 1992, the housing provident fund system was born, and people flocked to the real estate market. If you want to engage in real estate, the most important thing is money and connections, although Liu Zhongtian was small and wealthy at that time, it was not worth mentioning compared with those business predators.
Since the real estate industry can't squeeze in, it is better to continue to do supporting business. Cement was used to build a house, steel was used, and these markets were already filled by others at that time. Is there anything else worth trying?
Aluminium! Liu Zhongtian had a flash of inspiration in his mind, it is not enough to build a house with walls and roofs, but also to have doors and windows, and these things require a lot of aluminum.
In 1993, Liu Zhongtian took out the wealth accumulated over the years, and brought Weiliwang Company from Hong Kong as a partner, and jointly established Zhongwang Aluminum Co., Ltd. in Liaoyang, which is mainly engaged in architectural aluminum profiles.
This business made Liu Zhongtian suddenly rich, and in four years, Zhongwang's output reached 100,000 tons. As early as 1997, Zhongwang got the index of A-share listing, but there were too many rules and regulations for listed companies at that time, so Liu Zhongtian did not take that opportunity to enter the stock market.
This boom with the real estate industry lasted until 2001, when China officially joined the World Trade Organization (WTO) and the world's most lucrative American businessmen began to tap into China's business opportunities.
Zhongwang is one of the many Chinese companies favored by American capital, this year, Zhongwang's turnover just exceeded 100 million yuan, and Alcoa offered 450 million yuan to buy Zhongwang, on the condition that Liu Zhongtian continue to stay in Zhongwang.
This money is quite tempting for Liu Zhongtian, but after the company is sold, he has to work for others, which makes Liu Zhongtian feel bored no matter how he thinks about it, so he politely refuses the deal.
However, it was also in the exchange with Alcoa that Liu Zhongtian learned for the first time that the United States also has a huge aluminum market, but people do not only do this aluminum alloy doors and windows, but industrial aluminum with wider application and more profits, but also higher technical difficulty.
Transformation!
At that time, almost all of China's industrial aluminum depended on imports, and Zhongwang's own raw materials for building aluminum profiles actually came from the United States. If you can start a career in the field of industrial aluminum, it will not only be profitable, but also a blessing for the country.
But the problem is that industrial aluminum and architectural aluminum profiles are almost two different industries, and such a transformation is basically equivalent to giving up all their advantages and starting from scratch.
When Zhongwang's directors heard Liu Zhongtian's thoughts, they were speechless in surprise, and no one knew what the outcome would be if they embarked on this road.
Fortunately, Liu Zhongtian's leadership authority and personal prestige in the enterprise are enough to make him make a decision on this issue, when Zhongwang began to visit Europe and the United States, and soon after Zhongwang began to build a factory, and at the same time purchased 6 sets of large extruders from Germany at one time.
The specifications of the extruder are mainly distinguished by pressure, and the higher the pressure, the more the product can meet the needs of advanced industrial production. When other domestic manufacturers are using 5 to 10 trillion N extruders, the highest pressure of the extruders purchased by Zhongwang from Germany directly reaches 125 trillion N, and the product uses are directly aimed at train and aircraft manufacturing.
In order to buy machinery and build factories, Zhongwang has invested more than 2 billion. This is not the end, the money is spent and the construction is still needed, the factory is built and the machine has to be installed and commissioned, each of which will take two or three years, and it is difficult to say whether Zhongwang can survive until that day.
In 2004, when shareholders were still worried about investing large sums of money, Liu Zhongtian brought good news that he had won his first customer, the Ministry of Railways of China.
At the beginning of the 21st century, the Ministry of Railways has a new plan, and the high-speed rail construction project that symbolizes the speed of today's China is about to emerge, but the implementation of this grand blueprint is difficult due to the constraints of foreign companies.
After hearing that Zhongwang was building a 125 trillion bull aluminum production plant, the leaders of the Ministry of Railways were overjoyed and reached a cooperation intention with Zhongwang very happily.
Since 2005, Qiqihar Rail Transit Equipment Co., Ltd., CSR Group Zhuzhou Vehicle Factory, CSR Group Beijing Erqi Vehicle Factory, Baotou North Venture Co., Ltd. and other enterprises under the Ministry of Railways have sent orders, and after 2007, the orders for conductive rail aluminum profiles for subway and light rail have also been taken by Zhongwang.
A large number of orders from the Ministry of Railways not only solved Zhongwang's urgent needs, but also put a layer of "government recognition" halo on Zhongwang. In 2008, when the 125 megan extruder was put into operation, a large number of epoch-making projects such as the Capital Airport, the Beijing Olympic Games, the Shanghai World Expo, and the Guangzhou Asian Games had signed contracts with Zhongwang, and the total value of these contracts alone was as high as 7.2 billion yuan.
In the first half of that year, Zhongwang's operating income reached 11.26 billion yuan, becoming the first aluminum profile enterprise in Asia and the third largest in the world. Not only that, the gross profit margin brought by industrial aluminum profiles has also reached more than 40%, far exceeding the 12% when Zhongwang made architectural aluminum profiles, and the shareholders who originally sighed also laughed from ear to ear in 2008.
2008 was a disastrous year for many countries around the world, when the financial crisis engulfed countless companies and many countries fell to the point of government bankruptcy, but Zhongwang bucked the trend in 08 and 09.
In May 2009, Zhongwang was listed in Hong Kong at the request of its investors, becoming the world's largest IPO in the midst of a depression. At the celebration banquet, the teams of CITIC Securities and UBS Securities, which were under great pressure as sponsors, cried bitterly, and Liu Zhongtian himself became the richest man in China that year because of Zhongwang's listing.
Outwitting the U.S. government
Zhongwang's business is not only limited to the country, the United States is also an important market for them, in Zhongwang's high-quality and low-cost product offensive, American companies have been losing ground one after another, in 2009 Zhongwang's revenue in the United States was as high as 830 million US dollars, and finally forced the US government to wave the stick of sanctions.
In the second half of 2010, the U.S. Department of Commerce announced that it had launched an anti-dumping and countervailing investigation on China's aluminum profiles exported to the United States.
In this industry, such high tariffs are no different from directly banning Zhongwang from the U.S. market. Zhongwang's revenue fell by 30% in 2010 and plunged by 60% in the first quarter of 2011.
Dependence on the U.S. market brought Chung Ho on the verge of collapse for a time, but it wasn't long before the Americans found that Chung Ho was still doing well, but that American companies were becoming less and less viable.
When the sanctions were first announced, the United States imported only 14% of aluminum profiles from China in its domestic market, but five years later this figure expanded to 40%.
Once upon a time, the United States occupied half of the global aluminum profile market, but in 2017, there were only 5 factories in the United States producing aluminum profiles, with an annual output of 740,000 tons, while China's annual output of aluminum profiles reached 32.6 million tons, supplying 54.33% of the global market demand.
The U.S. government was puzzled, but U.S. companies began to investigate privately. In 2014, a California aluminum executive was given an aerial photograph from Mexico, and the moment he saw the photo, the executive broke out in a cold sweat.
I saw that the photos were densely packed with aluminum profiles, and the number of them was unsightly, and the desert under the plane was directly covered by these aluminum profiles.
As a rough estimate, there are as many as 1 million tons of these aluminum profiles, accounting for 6% of the global inventory, enough to produce 2.2 million Ford F-150 cars.
This staggering amount of aluminium profiles is the work of Liu Zhongtian, who began exporting them to Mexico after being sanctioned by the U.S. government, where they are processed into aluminum pallets.
At the same time, he controlled six companies in Southern California and imported the aluminum pallets into the United States in their name, thus evading the sanctions stick of the U.S. Commerce Department.
The Americans were so angry that they began to secretly plan a new round of retaliatory measures against Zhongwang and Liu Zhongtian, which lasted for more than five years, until they suddenly attacked after the 2019 China-US economic and trade consultations.
Of course, at the same time that Liu Zhongtian was prosecuted, Zhongwang's way to evade sanctions was also blocked. The U.S. government later released the results of the investigation, which said that Zhongwang exported a total of 2.2 million aluminum pallets to the United States from 2011 to 2014, involving a total of $1.8 billion in taxes, making the case the largest tariff in the history of the United States.
In April 2022, a U.S. court convicted six U.S. companies controlled by Liu Zhongtian of paying a $1.83 billion fine and convicted of fraud on 24 counts with a five-year suspended sentence.
However, a few months after the US court pronounced the verdict, the relevant creditors submitted a bankruptcy reorganization application to the Liaoning Intermediate People's Court, involving 14 Zhongwang companies including Liaoning Zhongwang Group Co., Ltd., and Zhongwang came to the point of exhaustion.
Zhongwang ended
Before 2020, Zhongwang had always been considered a very profitable company, and even in 2019, when the market was bad and it was sued by the United States, its profit still reached 1.789 billion yuan.
However, the 2020 statement shows that the company's total assets are only 127.97 billion yuan, but the total liabilities have reached 91.033 billion yuan, and the asset-liability ratio is as high as 71.14%.
It was only at this time that attention was paid to a new factory opened by Zhongwang in Tianjin.
It is said to be a new plant, but in fact it has been under construction since 2011. The planned annual production capacity of the plant is 3 million tons, and Zhongwang has purchased 9,000 acres of land for it, and this cost is only a small part of the entire factory construction project, and Zhongwang has invested 46.6 billion yuan in this project.
In the original plan, the first phase of the 1.8 million ton Tianjin plant could be put into production in 2014, but the project schedule was delayed again and again, and the first phase of the project was put into operation until 2017, and the capacity utilization rate was less than a third in the following years.
Even if it is partially put into operation, the total book value of the Tianjin factory is only 17.4 billion yuan, and it will take the year of the monkey to get back the cost of factory construction.
There are many investments like this in Zhongwang, and the Tianjin factory is just a microcosm of Zhongwang.
In addition to engaging in industry, Liu Zhongtian also tried to establish his own financial empire, for which Zhongwang successively invested in a number of banks such as Liaoyang Bank, Dalian Bank, and Jilin Bank. In 2016, when Junkang Life's performance declined, it spent 32.5 billion yuan to take over the shares of Junkang Life Insurance from Shanshan.
As of 2018, Zhongwang has as many as 9 financial institutions with direct or indirect shares, and Liu Zhongtian is counting on this strategy of "big industry + big finance" to achieve two-legged walking, but he didn't expect both legs to fall into the quagmire.
Since being controlled by Zhongwang, the sum of Junkang Life's three-year net profit has been less than half of that in 2014, and other Zhongwang financial institutions have also become more and more dismal.
At the end of that year, Zhongwang's discretionary short-term deposits, cash and cash equivalents added up to only 1.017 billion yuan, and Zhongwang came to the critical point of the thunderstorm.
During this period, Liu Zhongtian also sought a way out for Zhongwang, such as replacing Xinjiang Zhongfang, a subsidiary of China Real Estate Co., Ltd., with China Zhongwang's assets, and making up the difference with shares. However, with the announcement in August 2021 that China Real Estate would stop issuing shares for the acquisition of Zhongwang shares, this wrist cutting self-rescue ended in failure.
In the same month that Zhongwang released the news, Zhongwang was suspended from trading on the Hong Kong Stock Exchange, and two months later, Zhongwang also announced that its subsidiaries and its subsidiaries had serious operating difficulties and could not rely on their own strength to solve the current problems.
On April 13, 2023, Zhongwang was officially delisted, and the story of Liu Zhongtian and Zhongwang ushered in the end.
When he became the richest man in China in 2009, Liu Zhongtian once said: "That thing is all false, not a fact, once the crisis comes, no matter how much net worth is not shrunk all at once." More than a decade later, this sentence became his most accurate prediction.
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Resources
HE Jipai,ZHONG Dai,CAO Yanjun. 21st Century Business Review,2021,(11):50-52.
CAI Yu,DENG Pan. China Entrepreneur,2009,(10):47-54+46+10.