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China’s Detention of Entrepreneur Raises Fresh Concerns About Vulnerability of Private Firms

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Chinese authorities have detained an outspoken entrepreneur and taken control of his businesses, reviving a debate about the state’s dominance over private industry and rule of law in the world’s second-largest economy.

Sun Dawu and the conglomerate he founded, Dawu Agricultural and Animal Husbandry Group, had been publicly feuding with a state-owned farm in China’s northern city of Baoding over a long-running land dispute when police detained him, members of his family and other senior Dawu executives last week.

Mr. Sun and others are in custody for allegedly causing public disorder and disrupting industrial operations. Local officials have stepped in to manage at least some of Dawu’s businesses, including a hospital and a middle school, according to a person briefed on the matter. Zhao Guang, a lawyer consulted by Dawu personnel, said authorities have restricted access to the company’s assets, leaving its staff unable to pay legal fees. It wasn’t clear how long these arrangements would last.

The detention of Mr. Sun, who has gained prominence in China speaking up for farmers and rural businesses, has rippled through Chinese social media and unnerved many within the country’s legal and business circles. Some say the incident underscores the tenuous existence that many private Chinese companies face, particularly when confronting state-backed rivals.

“A dangerous precedent has begun…an enterprise that one so painstakingly built could be completely taken over in a moment of carelessness,” a writer, who goes by the pen name “Xiao Hui,” wrote in a commentary that went viral on the

WeChat

social-media platform. It has garnered more than 100,000 views. “In this winter, entrepreneurs across the country will be paying attention to the fate of Sun Dawu and Dawu Group.”

Since taking power in late 2012, Chinese leader Xi Jinping has sought to strengthen Communist Party control over the economy, bolstering support for state enterprises and reining in some of the freewheeling capitalist instincts that fueled China’s private-sector boom in recent decades.

Though Mr. Xi has pledged to strengthen rule of law and provide more support for private entrepreneurs, some local governments have intervened in commercial disputes in favor of state businesses, such as by applying legal tools to pressure their private-sector rivals, Chinese lawyers say.

The precise charges against Mr. Sun and Dawu staff remain unclear. Police from Gaobeidian city, administered by Baoding’s government, said they imposed “criminal coercive measures” on Mr. Sun and other Dawu personnel on Nov. 11 for allegedly “picking quarrels and provoking trouble,” as well as “sabotaging production and business operations.” They didn’t elaborate.

A former soldier-turned-farmer and entrepreneur, the 66-year-old Mr. Sun has clashed with the government from time to time since he founded Dawu Group in the mid-1980s as a pig- and chicken-farming business in his home province of Hebei. In 2003, he was detained and handed a suspended jail sentence for illegal fundraising after speaking up about the difficulties that rural businesses face when borrowing money—a speech at the prestigious Peking University that won him widespread acclaim.

More recently, Mr. Sun has voiced support for human-rights lawyers and criticized local officials over what he described as the unfair treatment of his company, whose widened interests now include fertilizers and tourism. Last year, he accused Hebei officials of refusing to acknowledge the spread of the African swine fever within the province, saying on his Weibo microblog that 15,000 pigs at his farm had died from the disease.

Mr. Sun’s musings on social issues won him respect from liberal-minded intellectuals, while business schools have cited his innovative corporate practices in case studies. “Sun Dawu isn’t just an entrepreneur, but also a thinker,” Wang Jiangsong, an academic at the China University of Labor Relations, wrote in a WeChat post that has since been deleted. “If Sun Dawu the person and Dawu Group are ruined, it’d really be a violent destruction of heavenly creations.”

Police officers and workers in protective suits at a checkpoint on a road leading to a Dawu farm in Baoding where African swine fever was detected in February 2019.



Photo:

hallie gu/Reuters

Dawu’s latest predicament appears linked to a land dispute between rural residents and a local state-run farm, according to Mr. Zhao, the lawyer consulted by Dawu, and the company’s social-media posts. The Dawu posts say the origins of the dispute go back to the 1960s, when the state-run farm leased about 122 acres of land from the village of Langwuzhuang, Mr. Sun’s hometown. The village later also leased land to Dawu.

Langwuzhuang residents have accused the state-run farm of occupying more than 395 acres of their land, far exceeding the leased amount, according to social-media posts by Mr. Sun and Dawu, whose personnel have confronted state-farm counterparts over the dispute.

The spat escalated in early August when state-farm personnel allegedly attempted to demolish a Dawu office in the middle of the night. Local police intervened after Dawu workers and villagers clashed with state-farm personnel, an incident that left more than 20 people injured, according to Dawu’s accounts of the event.

Later that day, Mr. Sun shared on Weibo a Dawu social-media post that accused a local police official of ordering officers to beat up Dawu workers and local residents. In an Aug. 19 post, he wrote: “Some people say, police are the government’s impartial law enforcers, but once they intervene in an economic dispute, they’ll become hired thugs who protect property for a certain interest group or a certain person.”

Baoding State-Run Farm’s general manager, Zhang Hongsheng, told Chinese media that the farm tore down structures on its premises that Dawu had built in violation of regulations. He said the farm called the police after Dawu allegedly made further attempts to disrupt its operations. Mr. Zhang didn’t respond to a request for comment and hung up when reached by phone.

Mr. Sun and members of his immediate family, including his elder son and Dawu chairman, Sun Meng, were among nearly 30 people detained, according to Mr. Zhao, the lawyer consulted by Dawu personnel. A handful of those detained were released later the same day, Mr. Zhao said.

Baoding’s propaganda and police departments declined to comment. Gaobeidian police also declined to comment.

Mr. Sun and his family couldn’t be reached. A Dawu official, reached by phone, declined to comment. Staff at Dawu’s hospital and middle school said their facilities were operating normally, but declined to comment further.

The case has prompted debate among lawyers over whether the government has overstepped in assuming control over his businesses.

“When applying legal methods and measures against a company, we have to see whether the company itself has acted illegally,” Liu Changsong, a Beijing-based lawyer who isn’t involved in the case, wrote in a commentary published on social media. “We can’t think that: ‘Sun Dawu did something wrong, so we can apply any measure against his company because they are linked.’”

Others urged against jumping to conclusions. Ran Xiaoyi, a popular legal blogger, wrote on Weibo that some lawyers are prejudicing the investigation by speculating about what is being done to Mr. Sun. “Let the bullets fly for a while, and the outcome will naturally emerge.”

—Raffaele Huang contributed to this article.

Write to Chun Han Wong at chunhan.wong@wsj.com

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