A billionaire farmer fights his jailing as tycoons face crackdown in China

Hong Kong: In a handwritten submission from his prison in rural northern China, billionaire pig and chicken farmer Sun Dawu implored the court to hear his appeal. He was serving an 18-year sentence on charges including corruption. There was far more at stake than his own unjust conviction, the 70-year-old tycoon wrote in his November 16 plea.

Without his leadership, the business he’d built for decades would collapse, he warned. His company, Hebei Dawu Agriculture and Animal Husbandry Group, had more than ten thousand employees.

If his appeal was delayed, “the enterprise will be completely wrecked,” he wrote in the legal document, seen by Reuters. “I don’t think this is what leaders of the court, party committees and governments at all levels want to see.”

The collapse of the giant business Sun built would indeed be unwelcome for Chinese leaders, at a time when a massive property crisis poses the biggest threat to China’s economy in decades. But his jailing in July 2021 shows how power is as big a priority as prosperity for the Chinese leadership.

Sun is one of the highest-profile casualties in a campaign under President Xi Jinping to clamp down on tycoons and top executives who are seen as a threat to the Communist Party’s control over the economy, according to Chinese criminal defense lawyers and fellow entrepreneurs familiar with Sun’s case. In the past three-and-a-half years, at least three dozen top business and financial figures have been detained, investigated, indicted or jailed, according to the website of China’s Central Commission for Discipline Inspection, police statements, reports in state-controlled media and stock exchange filings.

Of these, at least 22 were in the private sector and more than a dozen worked at state-controlled firms. The biggest names are in the private sector, which accounts for more than half of GDP and the majority of jobs in China.

In Sun’s case, he dared to be a persistent critic of the Party and a long-time supporter of pro-democracy activists and liberal intellectuals in China. His 18-year sentence effectively spells life in jail given his age, his lawyers say.

It sends a clear message, they add: The party is committed to quashing any threat to its monopoly on power, even at the cost of economic growth.

China's leadership rejects that view. The government “attaches great importance to the private sector,” and the suggestion that China is “cracking down” on business is false, a government official told Reuters. A crackdown would contravene China's stated policy goals and run counter to its interests in developing private enterprise, the official said.

So far, the Hebei Province People’s High Court hasn’t agreed to hear Sun’s appeal, his legal advisers say. In addition to Sun, his family and top executives were jailed in the case.

Sun’s company is also under new management. In April 2022, Dawu was sold to a group set up just three days before a court-ordered auction, Chinese corporate filings and court documents show. It was sold at a fraction of its true value, according to social media posts by his family. Reuters couldn’t independently confirm the value of Dawu Group or the current financial health of the business.

This account of Sun’s imprisonment and battle to regain his freedom is based on previously unreported legal and court documents, along with new details from interviews with his lawyers, dissidents and fellow entrepreneurs.

Xi’s forceful assertion of state control over big business is another chapter in the turbulent relationship between individual enterprise, capital and the Party since the Communists seized power in 1949. Private business played a crucial role in reviving China as it emerged from the economic calamity of the Maoist years, when it was better to be “red than expert,” according to one of the slogans at the time. After Mao, in the era of Deng Xiaoping, a new slogan emerged: “to get rich is glorious.”

Now, the Chinese leader sees menace in the rise of a tycoon class, say Chinese human rights lawyers, dissidents and some academics.

“You can’t look at Sun’s case in isolation,” said Li Jinxing, who was one of China’s top criminal defense and human rights lawyers before being disbarred for criticizing legal and political authorities. Unable to act in the case himself, Li assembled a team of about 30 lawyers who unsuccessfully represented Sun and some co-defendants. “In my opinion, the case is part of China’s wide-ranging elimination of private businessmen who have gained broad social influence.”

A pattern

Sun’s fate does appear to fit a pattern. In September 2020, real estate tycoon and blogger Ren Zhiqiang was sentenced to an identical 18 years for corruption. Ren was detained after an article, widely attributed to him and circulated online, criticized the government’s handling of COVID-19. Without naming the Chinese leader, the article described the authority responsible for the pandemic response as a “clown stripped naked” – remarks widely interpreted as an attack on Xi.

Reuters couldn’t independently confirm if Ren was the author of the article. He couldn’t be reached for comment. When Ren was expelled from the Party in 2020, investigators said he had “shown disloyalty” and “besmirched” it, the government official told Reuters.

Also jailed for 18 years in 2018, for fraud and embezzlement, was Wu Xiaohui, former chairman of Anbang Insurance Group. Anbang was best known abroad for acquiring New York’s landmark Waldorf Astoria hotel. Prosecutors said Wu displayed unchecked ambition and reckless expansion, which resulted in risks to the Chinese financial system – a charge also leveled at other business moguls. He was also charged with fraud and embezzlement involving more than $10 billion.

Li Jinxing, the former defense lawyer, said he was Wu’s attorney for his appeal but was barred from meeting him. Li noted that Wu, Ren and Sun – three different tycoons in different places charged with different crimes – all got the same sentence.

“This isn’t a coincidence,” said Li, who left China in 2022 and is now living in Tokyo. “It’s very simple. The authorities want them to die in jail. It’s terrifying when you think about it.”

China’s top leadership has been promoting its support for the private sector as it seeks new investment at a time when economic growth has slowed. At a key meeting in July, the so-called third plenum, leaders resolved to leverage the role of market forces in the economy.

In comments in state media, Xi has stressed China remains committed to two “unswerving commitments” – developing the private and state sectors at the same time. Xi has also said the Party believes that private business owners and entrepreneurs “belong to our own family.”

Still, as the Party tightens control over business leadership, dozens of other high-profile entrepreneurs and executives have been jailed, arrested and sidelined – or have vanished from sight, widely believed to have been detained and put under investigation.

Alibaba’s Jack Ma, once a ubiquitous presence in the tech world, has been largely absent from the business since publicly criticizing Chinese regulators in 2020. He now stays mostly out of view.

Celebrity banker Bao Fan resigned from his posts of chairman and CEO of China Renaissance Holdings Ltd, citing health reasons and a desire to spend more time with his family, according to a filing to the Hong Kong stock exchange in February. Earlier, the investment bank had announced that Bao was cooperating in an unspecified investigation, without elaborating. China Renaissance didn’t reply to a request for comment.

Also in February, a Chinese court imposed a suspended death sentence on the former president of China Merchants Bank, Tian Huiyu, after convicting him of charges including bribery and insider trading.

In Hong Kong, pro-democracy media baron Jimmy Lai is currently on trial for sedition and collusion with foreign powers. Lai is already behind bars for other offenses imposed in a national security crackdown in the former British colony. The city’s once high-profile magnates have become all but invisible, a sharp departure from the days when vast wealth and commercial success were seen as virtues to celebrate.

Ma and Fan didn’t respond to questions sent to Alibaba and Renaissance. Reuters was unable to contact Tian.

Caoilfhionn Gallagher, who heads Lai’s international legal team, said Lai was “imprisoned due to his work as a media owner, writer and pro-democracy campaigner.” Lai’s son, Sebastien, said his father’s case is different from those of the mainland moguls. Lai’s jailing is “not part of a power struggle or tied up with China’s economic situation, which seems to be what has taken down a lot of the tycoons mentioned.” His father was in prison, he said, “because he campaigned for democracy in Hong Kong.”

The Chinese government official said the prosecutions detailed by Reuters don’t show an effort by Beijing to control or limit the private sector. Viewing the cases as evidence of a trend, without taking into account the evidence in individual trials, reflects a “lack of truth and balance,” he said. “China is a country ruled by law.”

It’s impossible to quantify the impact of the crackdown. It coincides with a series of systemic challenges, including a deep property market crisis and soaring local government debt.

While the economy grew 5.2 per cent in 2023, Chinese tech companies have lost well over $1 trillion in market capitalization since Xi moved against the sector more than three years ago. There has also been a dramatic fall in inbound foreign direct investment, which plunged 29 per cent in the first half of 2024 compared with the same period in 2023. Foreign companies in China cite slowing growth and an increasingly difficult business climate for that decline.

Three years ago, private firms accounted for 55 per cent of the value of China’s top 100 listed companies by market capitalization. At the end of June, that had dropped to 33 per cent, according to data from the Peterson Institute for International Economics.

The private sector has been a crucial part of China’s economic system since the reform era began under Deng Xiaoping, the Chinese official said. “It’s not going to change.”

The clampdown, though, has delivered a windfall for authorities facing falling tax revenue and swelling debt.

The Dawu Group was forced to refund more than one billion yuan ($140 million) when Sun was convicted. When Wu Xiaohui was jailed, authorities confiscated 10.5 billion yuan from him. Alibaba paid a $2.8 billion fine in the regulatory crackdown that followed Ma’s criticism of regulators. All of Tian Huiyu’s assets were confiscated.

Outspoken farmer

Sun was convicted on charges including “picking quarrels,” inciting crowds to attack state agencies, unlawful occupation of agricultural land and illegal deposit-taking, according to court documents. Nineteen other defendants were jailed for shorter terms in the case, including his wife, two sons and senior executives of his company.

In setting out grounds for an appeal, Sun said in his submission from Longyao Prison that some evidence tended at his trial was fabricated, some was exaggerated, and other allegations didn’t involve illegal conduct. The valuation of his company and the auction were illegal and violated his property rights, he wrote. In social media posts, his family members have said the Dawu Group was valued at 10 billion yuan (about $1.4 billion). It was sold to the Baoding Ruixi Technology Group Company Ltd for 681.6 million yuan (about $96 million), according to Sun's family and legal advisers.

Baoding Ruixi didn’t respond to a request for comment.

Sun did acknowledge errors of judgment, writing that he was mistaken in sharing online an article accusing police leadership of sheltering organized crime. While the article was true, Sun said, it was a mistake to forward it.

The submission was Sun’s second effort to have his conviction overturned. A local court swiftly rejected his first appeal in the month after his sentencing, according to a copy of that decision seen by Reuters.

That court, based in Hebei Province, didn’t respond to questions from Reuters. The provincial High Court also didn’t respond to Reuters.

Sun began his enterprise in the mid-1980s with 1,000 chickens and 50 pigs, he has repeatedly said. Earlier, he endured the profound poverty and chaos of the Maoist era to become one of the pioneers of rural industry, when the economy began to open up under Deng.

The seeds of Sun’s demise, though, were sown long before his arrest. A self-made man, he wasn’t cowed by authority. His straight-talking manner would earn him powerful enemies.

His reputation for success early in his career meant the Party was willing to seek his advice on agriculture. He was twice invited to the leadership enclave at Zhongnanhai in Beijing to brief senior leaders and policy makers on rural matters, Sun has said in public remarks. On at least one occasion, his blunt views displeased officials.

On his first visit to Zhongnanhai, in December 1998, he explained to Wu Yi, a future vice premier, how state monopolies in agricultural industries were preventing farmers from boosting their incomes, according to an account of the meeting Sun posted on his company website. Sun spoke for 40 minutes. As Sun was leaving, an official asked him if it was his first time visiting the leadership enclave, Sun later said in a 2003 speech. Sun told the official it was indeed his first visit. “This is your last time here,” the official replied, according to Sun's account.

But Sun did get to make a second visit. In April 2003, he was invited to brief a different set of government officials. He didn’t hold back. This time, he told them about what he believed were excessive restrictions on farmers’ business activities, Sun wrote on the company website.

In a speech that month at China Agriculture University in Beijing, Sun reminded a packed auditorium of the misery imposed on the country by Maoist political movements, according to a copy of his remarks.

His home district of Xushui, just an hour’s drive from Beijing, had been a springboard of the 1958 Great Leap Forward, a radical and ultimately disastrous campaign to boost agricultural and industrial output. Historians estimate that tens of millions perished across China after these top-down policy changes caused food production to collapse.

Sun said he was born four years before the movement began. He recalled there was nothing to eat in the house in the ensuing famine, where his area was one of the hardest hit. People were so hungry in Xushui, Sun told the audience, that they ate corn cobs, cotton stalks and cotton husks soaked in lime water.

“Without fear of ridicule from you all, we were so constipated we could not defecate, so we used a spoke from a bicycle wheel to dig the feces from our rectums,” he said.

Sun went on to recognize Mao’s revolutionary achievements but also his tyranny. It would be a triumph for the Communist Party if it could now guide China to democracy, he said.

Sun was long one of the few top executives prepared to speak out in support of democracy and the rule of law, say human rights lawyers and dissidents. Before launching his business, the high-school-educated Sun served as an army officer and worked in a bank. Friends say he is well read – something evident from his speeches.

In his 2003 address at China Agriculture University, according to a copy of his speech, Sun recited from the poem “Dreams,” by American poet Langston Hughes, in urging students to remain faithful to their ideals.

That same year, shortly after criticizing the Party in his lecture, Sun had a major brush with the law: He was found guilty of illegally raising funds for his business and given a suspended sentence of three years in jail, but was able to continue building his empire.

Friends describe Sun as a simple man who shunned displays of wealth. He dressed in the inexpensive slacks, casual shirts and comfortable shoes worn by many middle-aged men in rural China.

“If you saw him, you would not think he was rich,” said businesswoman and pro-democracy activist Anna Wang Ruiqin. “He looks like a farmer from north China. But when he talks you can tell he is very smart and full of ideas.”

Wang and Sun met about eight years ago at a liberal Beijing think tank, the Unirule Institute of Economics. Wang said she and Sun were members of a research project for entrepreneurs at Unirule before the acclaimed think tank was forced to close in 2019 as Xi tightened controls over free speech.

At the time, Wang was running a four-star resort hotel in the north-western Chinese province of Qinghai and was a leader at a local church. She was conducting research into the treatment of minority Tibetan and Mongol ethnic groups by the Communist Party. She said Sun advised her to leave China as the economic and political climate became increasingly restrictive.

“He told me: ‘Anna, you have to go and go quickly’,” said Wang. Sun told her he was unable to leave China because his occupation was tied to the land, and he felt responsible for the survival of his business and the welfare of his employees, she said.

Wang left in 2018. She now lives in Washington DC, where she campaigns for human rights and democratic change in China. She said her assets in China have been frozen and she has lost control of her hotel.

The Chinese authorities didn’t respond to questions about Wang.

It is not just Sun’s criticism that angers the authorities, according to his lawyers and human rights activists. His business model is also unsettling for the Party. In speeches and public statements, Sun describes his approach to creating wealth as a blend of Confucianism, respect for the rule of law and a socialism-inspired goal of shared prosperity.

At Dawu Group headquarters, employee benefits included housing, schooling, vocational training, subsidized health care at a 1,000-bed hospital and retirement facilities, according to visitors. They say the agricultural industrial complex he built resembles a self-contained town. In a court document seen by Reuters, Sun said the Dawu school had over 10,000 students and teachers, mostly from more than 12 surrounding villages.

“This is a threat to the authorities because it shows that the Communist Party isn’t as good at providing benefits as the private sector,” said Wang.

Nothing to do with the law

Some dissidents say it’s unlikely any Communist Party leader would tolerate the rise of powerful independent business leaders.

“Deng Xiaoping famously said that it doesn’t matter if a cat is black or white, as long as it can catch mice,” said Li, the former defense attorney, referring to the late Chinese leader’s pragmatic axiom that ideology took a backseat when it came to the economy. But, Li added, the saying only partly captured Deng’s sentiment. “In reality, what he meant was, you can catch mice, but never forget you are my cat,” he said. “You are not a free cat.”

From early in his tenure as Chinese leader in 2012, Xi made protecting the party’s monopoly on power a primary objective, convinced this was imperative to prevent a Soviet-style collapse, according to reports of his early speeches and leaked internal documents. First, he tightened his hold on the military and security services and eliminated political rivals. In 2015, the Party cracked down on human rights lawyers. Later, national security laws were used to virtually wipe out Hong Kong’s pro-democracy camp.

Xi, now in his third term, routinely acknowledges the crucial role the private sector has played in generating wealth and jobs. In an address last year, he said private businesses accounted for more than 50 per cent of tax revenue, 60 per cent of GDP and 80 per cent of urban employment.

But a by-product of this growth driven by the private sector was the spread of liberal ideas.

“This is an unintended consequence,” said former Chinese human rights lawyer Teng Biao. “It isn’t what the Communist Party wanted to see.” Teng left China to avoid arrest in 2014 and now lives in the U.S. “When the Party faces this kind of dilemma, the choice isn’t difficult,” he said. “They always prioritize politics over the economy.”

Teng was part of the legal team that defended Sun in 2003, when the entrepreneur was first prosecuted after his Beijing lecture. Over the years in Hebei, Sun survived numerous disputes with jealous, greedy and sometimes violent local bureaucrats and Party officials, according to his speeches and lawyers. Sun has described unreasonable demands from tax collectors, accused local officials of poisoning his livestock when he refused them a share of his business, and reported one instance in which he was bashed with a hammer by a relative of a local official.

The Hebei authorities didn’t respond to a request for comment.

On Nov. 11, 2020, the full force of the state moved against him. That day, according to lawyers involved in the case, six busloads of armed police with dogs descended on the sprawling Dawu Group complex at Xushui. The police arrested Sun, his wife, their two sons and their wives. They also scooped up the entire company management team, defense lawyers said. In all, 28 people were taken into custody.

Dawu’s bank accounts were frozen, the lawyers said. Police were posted to all entries and exits. Government officials were assigned to manage the business and its subsidiaries, according to Sun’s lawyers, a move they said seriously impaired the group’s operations.

A catalyst for the arrests, according to Sun’s legal advisors, was his accusations on social media that Hebei provincial authorities mishandled a major outbreak of swine flu in 2018. The disease hammered China’s hog industry. In a social media post, Sun said 15,000 pigs had died at the Dawu Group.

The arrests and subsequent trial at the city of Gaobeidian in Hebei were all conducted with a heavy police presence and a ban on press coverage.

Local prosecutors built a case against Sun and the other defendants based on a land dispute between Dawu Group and a neighboring state-owned farm that ended in clashes between employees of the two sides.

“Their objective was very clear,” said Yang Bin, a former government prosecutor turned defense lawyer. “They wanted to totally crush his whole business.”

But Yang was unable to represent the defendants in court. Her law license had been canceled after she sheltered Xu Zhiyong, one of China’s most prominent dissidents, at her home before his arrest in 2020. However, she spent more than a year in Xushui helping to coordinate between the Dawu company and the defendants.

The Party wanted the case to serve as “a deterrent,” said Yang, pointing to the overwhelming police presence. Yang left China late last year and is now living in New York.

While Sun had survived decades of wrangling with officialdom, the end came fast. On July 28, 2021, the case against him and his co-defendants was wrapped up with guilty verdicts after a trial lasting just 14 days.

Sun had expected the courts to deliver justice, former attorney Li said. But for his lawyers, familiar with the Chinese legal system, the rapid pace of the trial was a bad sign.

“When a case goes so fast, it has nothing to do with the law,” Li said. “It is an exercise of the will of the leadership.”