A Chinese Robin Hood Runs Afoul of Beijing

August 24, 2003 By JOSEPH KAHN

BEIJING, Aug. 23 - The arrest of a rural businessman who antagonized government officials but earned a loyal following among peasants has created a sensation in Beijing, where influential scholars say he showed how to improve life in the vast, backward Chinese countryside. The businessman, a bold and politically artless onetime farmer named Sun Dawu, is in jail awaiting trial in Hebei Province in northeastern China on charges that he ran an illegal credit cooperative and lured millions of dollars in deposits away from state banks.

In opinion columns and popular Web sites, though, liberal-leaning intellectuals have portrayed Mr. Sun as a modern Robin Hood. They say he battled state finance and trade cartels that they view as draining the savings of China's 800 million peasants to support urban development.

Lawyers for Mr. Sun and supporters in Beijing's academic circles are pressing the government to scrap or define more clearly the scope of the law Mr. Sun is accused of breaking. The loosely worded article gives the authorities broad discretion to charge businessmen who fall out of favor with a catch-all crime called illegal fund-raising.

"It's well worth considering what this case is really about," said Jiang Ping, the former president of the Chinese University of Politics and Law and one of China's most prominent legal experts. "Perhaps the government is violating the law and has wrongly accused him. If this isn't handled properly, it will greatly affect rural economic development."

The support for Mr. Sun is part of a broader effort to bring about gradual political change by pressing top leaders to apply their sometimes high-profile promises to real situations. Even the state-controlled press increasingly highlights individual examples of abuse by local governments in the provinces, prodding the authorities to make good on pledges to respect the rule of law.

Civic pressure may have had an effect on the way officials handled another recent case, over the beating death of a migrant worker held in police custody in Guangdong Province. After a trial that attracted sustained attention in June, the central government abolished a law that gave the police power to treat rural migrants as vagrants who could be detained at will.

Mr. Sun's supporters include many of the same people who campaigned to have the migrant law overturned. They say they hope the central government will rewrite finance regulations to give businessmen more freedom to raise money and to limit the influence of state banks and local officials.

"One of the biggest problems for peasants is that local officials decide who gets money and who doesn't," said Xu Zhiyong, a law professor at Telecommunications University in Beijing and a legal adviser to Mr. Sun. "This is about taking the politics out of finance."

Mr. Sun, who is 50, grew up in a farm family. He joined the army and then worked at the state-owned Agricultural Bank of China. In 1985 he went into business, leasing wasteland and using it to raise chickens and pigs. His company, called Dawu Farm and Husbandry Group, has since expanded into food processing, cattle breeding and grape growing.

He initially had cordial relations with the authorities, who appointed him to the local branch of the People's Congress, the Communist Party-controlled legislature.

But even as Dawu Group grew to employ 1,500 people in Xushui County, a poor area, he had trouble raising money from state-run banks. Typically they lend only to larger companies that have state ownership or to entrepreneurs who give favors to bank officers. Mr. Sun arranged one loan in 1994, but was repeatedly denied credit in subsequent years, state-run newspapers reported. To raise money, Mr. Sun began offering banking services to his own workers. He accepted their deposits, paying interest rates slightly above what state banks offered.

The cooperative became so popular that local farmers who did not work for Dawu also made deposits. Mr. Sun eventually collected about $22 million from 4,600 area households, official newspapers said.

He has not been accused of fraud and apparently kept his workers and neighbors happy, these reports said. He promoted a quasi-collectivist philosophy, steering some company profits into roads and schools. He also challenged the state's grain-trading monopoly by buying wheat and corn from farmers at relatively high prices and selling processed foods in the free market.

But relations with officials deteriorated. Mr. Sun had not been shy in making charges about his difficulties getting loans. He publicly accused bankers of lending only to people who bribed them, which he said he refused to do.

At a well-attended seminar in Beijing earlier this year, he acknowledged making an exception. In 2000, he said, when he was short of capital to expand his vineyard, he gave the boss of a state-run bank a $1,200 bribe. But Mr. Sun said the boss considered the amount a pittance and still declined to make him a loan. So, enraged, he demanded his money back.

There were other strains. He was slapped with a large tax bill, which he fought in court. He also sued the land bureau. He lost his seat in the People's Congress.

As troubles mounted, Mr. Sun cultivated ties to a circle of scholars who study rural issues. He made speeches at top universities, arguing passionately that the nation's financial system effectively subsidized rich coastal cities at the expense of the interior. He posted these polemics on his company's Web site.

Though some of his speeches were detached and analytical, he also tested the limits of debate. He once said the Communist Party presided over a "fake republic."

"Our national political focus is to develop the cities," he said in a speech at Beijing University this year. "But what about the peasants? You could see rural problems becoming urban problems, and then the country will fall into chaos."

The Hebei provincial authorities detained Mr. Sun in late June and charged him with illegal fund-raising last month. His son continues to run his company, though many of its workers have been laid off and the bank was dissolved.

Mr. Xu, Mr. Jiang and others who have rallied to Mr. Sun's defense say they hope the central government will revise the legal provision used to charge him, which they argue theoretically forbids all borrowing and lending outside official channels.

"The problem with the current law is that it is so vague it gives undue power to local officials," Mr. Xu said. "Nobody will arrest you for borrowing money from one or two people, but you could get in trouble if you borrow from 100. The law does not draw a line."

More broadly, some rural experts say Mr. Sun showed how poor farm areas could prosper if given greater sway over financing. Though Mr. Sun's outspokenness makes him a problematic figure, they say China's leaders could still embrace his model to address endemic poverty.

Li Zhi, a longtime rural activist and writer who asked to be identified by his pen name, said that if the government let Mr. Sun off lightly, it could provide the biggest boon to rural development since the late 1970's. It was then that Deng Xiaoping dismantled agricultural communes and returned land to the people who farmed it.

"There is an opportunity here for a breakthrough," Mr. Li said. "On the other hand, if he gets a harsh sentence, the implications for farmers are dire."