Questions raised over ‘China fever’ development on Mersey

By Lucy Hornby in Beijing, Jamil Anderlini in Jiangyin and Andrew Bounds in Manchester

The faded red banners welcoming the “Wirral council leaders” were propped against locked glass doors just inside the office of Sam Wa Resources Holdings on Tuesday in Jiangyin, a city on the banks of China’s Yangtze River.
This is the home of the company whose chairman Stella Shiu, is supposed to be the driving force behind a large Chinese investment in Britain.
However, there was no indication of a thriving business in the small dusty office, let alone a large mining and trading conglomerate, ready to invest millions of pounds to regenerate the Mersey riverside in northwest England.
The Peel Group, a British developer that is proposing a £10bn project along the Mersey river, signed a joint venture with Ms Shiu last year to attract tenants to the International Trade Centre, a £175m business development planned as part of the waterfront scheme.
This project is among a series of Chinese investments presented as proof that the British government’s business-oriented approach to diplomacy is paying off as David Cameron, UK prime minister, prepares to fly to Beijing this weekend.
However, a close look at Sam Wa suggests that not all of the deals are equal.
At one end of the spectrum are Chinese state-owned investors such as China General Nuclear Power Group, which will take a one-third stake in the French utility EDF’s project to build a £16bn atomic power station in southwest England.
These companies are effectively arms of the Chinese state which enjoy access to cheap credit from state banks and the full backing of the ruling Communist party.
At the other end of the scale are investors such as Ms Shiu, whose partners in other ventures include an Iranian pomegranate juice exporter and an investment adviser in New Jersey who recently settled US Securities and Exchange Commission allegations of fraud and violation of securities regulations.
Corporate filings in Hong Kong show that Ms Shiu changed her Chinese name after a 2008 ruling by a Hong Kong court that declared her bankrupt for failure to pay a loan.
Several companies registered under her former name have been dissolved on the Chinese mainland, including one in Jiangyin, and the address of Sam Wa’s headquarters in Beijing turns out to be a closely guarded military hotel that does not allow outsiders to enter.
“There are a lot of governments and companies in the west that are starved of capital, and so when the promise of Chinese billions comes along they tend to get ‘China fever’. Unfortunately it can sometimes be fatal,” says James McGregor, chairman for greater China at Apco Worldwide and author of the book No Ancient Wisdom, No Followers.
“In China you need to do due diligence on investors.”
Peel executives have made frequent trips to China, often with British local government officials in tow, and Ms Shiu has visited Liverpool many times.
On a visit in October, she helped Lindsey Ashworth, Peel Group development director, to open Peel’s latest office project.
He joked that he picked Ms Shiu as a partner because of her ability to drink him under the table.
On May 28 2012, Peel signed a joint venture with Ms Shiu at a ceremony in a Beijing hotel, attended by Lord Green, UK minister of state for trade and investment, and Phil Davies, Wirral council leader.
Peel’s proposed International Trade Centre would be built on desolate former docks on the Wirral peninsula, near Liverpool, one of the most deprived cities in the UK.
Once the second biggest port in the world, many of the wharves along the River Mersey are crumbling.
Demolition of existing buildings on the site has not yet begun.
Ms Shiu is supposed to help attract up to 1,000 companies from across Asia to move into 2.5m sq ft of self-contained units where they can exhibit, sell and distribute goods into the European market.
During his China visit, Mr Cameron plans to highlight the Merseyside scheme as an example of regeneration projects in the UK that are ready to be marketed to Chinese investors.
Council-owned investment agencies in Liverpool and the Wirral have maintained that Ms Shiu is a “high-ranking member of the Chinese government” who has put £25m into the project, echoing claims made in the local press.
Their publicity talks of Chinese government approval and the multibillion-dollar size of Ms Shiu’s group.
Liverpool Vision, the city investment agency, said it made the claims in “good faith” while Invest in Wirral declined to comment.
Richard Kemp, leader of the opposition Liberal Democrats on Liverpool city council, said local authorities should “remove their rose-tinted spectacles. There has been lots of talk and little result.”
The Financial Times was unable to find any evidence that Ms Shiu works for the Chinese government.
In Shanghai, Sam Wa’s address is a tiny cramped office belonging to an organisation called “Shanghai Enterprise Top 100 Association”.
Employees there were busy this week preparing Chinese-language pamphlets featuring photos of Ms Shiu with Mr Ashworth, in anticipation of Mr Cameron’s visit.
A visit to another Sam Wa address, at the prestigious Yintai Office Tower in Beijing, revealed no sign of the company.
The group’s stated interests include electronics manufacturing, import and export, timber trading and a large mining concession in the Philippines, described on the International Trade Center website as a gold mine.
On Chinese web portals, Sam Wa has posted offers to sell laterite ore, a type of iron ore with nickel content that is much sought after by Chinese steel mills.
In addition to Sam Wa, Ms Shiu is a partner in the Warner Fund, a Beijing-based private equity fund that offers to bring small Chinese companies public in the US.
One of her partners in that fund, David Huakang Zhou, and his New Jersey-based company Warner Technology and Investment Corp agreed to pay more than $1.4m in October this year to settle fraud allegations pursued by the SEC in connection with helping Chinese companies to list in the US, marketing their shares to unsophisticated Chinese investors living in the US and improperly using the proceeds.
Mr Zhou did not admit or deny the allegations.
Ms Shiu was not involved in the SEC complaint.
Ms Shiu and Peel Group both declined interview requests and did not respond to a list of emailed questions.

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Britain goes soft on rights to woo China

Britain has downgraded human rights as an issue when dealing with China, a move which has made it harder for other countries to talk tough on the subject.
By Kiran Stacey in London and Jamil Anderlini and Lucy Hornby in Beijing

Stella Shiu, right, at the site of the proposed £175m Wirral project with Lindsey Ashworth, development director

Britain has been accused of softening its stance on human rights in China to attract foreign investment, despite doubts over the credibility of some of the groups who have offered to fund big projects.
As David Cameron, prime minister, prepares for a long-awaited visit to Beijing, a Financial Times investigation has raised questions about a project with Chinese backing in northwest England.
The FT has identified several anomalies with Sam Wa, a Chinese company that has proposed an investment in the £175m development on the Wirral.
The investment has been championed by UK Trade and Industry.
Stella Shiu, Sam Wa’s chairman, was declared bankrupt by a Hong Kong court in 2008, after which she changed her name, it has emerged.
Several companies registered on the Chinese mainland under her previous name have since been dissolved.
Richard Ottaway, chairman of the foreign affairs select committee, told the FT: “UKTI has got to justify its actions, it has got to explain why it recommended investment from this group.”
The deal between Peel Holdings, the company leading the Wirral redevelopment, and Ms Shiu’s company was originally signed in the presence of senior UKTI officials, including Lord Green, trade minister.
It was touted as an example of the kind of deal that is being promoted by Mr Cameron as he focuses Britain’s relationship with China firmly on securing trade between the two countries.
The prime minister will travel to China next week for the first time since the new Chinese leadership took over, ending a year-long diplomatic stand-off over his decision to meet the Dalai Lama in 2012.
He will take a large trade delegation with him, including dozens of executives from blue-chip companies and others from small and medium-sized businesses.
But the trip comes amid mounting concern that Britain is so keen to sign new deals that it is failing to carry out enough due diligence on prospective investors.
One of the biggest projects to have attracted Chinese backing is a £1bn property development in London’s docklands.
But Advanced Business Park, a Chinese company planning an office complex on the site, has only one completed project to its name: a development located on the far outskirts of Beijing in the city’s least affluent district.
John Spellar, a Labour member of the all party group on China, told the FT: “UKTI and the Foreign Office have to be careful and undertake due diligence to make sure of the bona fides and assets of any potential investors.”
Senior diplomats in China believe Britain may be going too far in trying to encourage inward investment into the country.
“Total capitulation” was the way one senior Beijing-based Asian diplomat described Britain’s climbdown over the Dalai Lama debacle.
“The whole situation has been poorly handled – 18 months ago Mr Cameron was the great defender of human rights speaking truth to China and saying the UK will act on principle, but now it seems to be about business and nothing else,” said Kerry Brown, an associate fellow at Chatham House and a former British diplomat.
“There’s a strong case to engage with serious Chinese companies and to welcome their investment, but some of the companies people like Boris Johnson are talking to have no record abroad at all. It all seems extremely unsophisticated.”
One senior European diplomat said it was clear from internal European meetings that Britain had downgraded human rights as an issue when dealing with China, a move which has made it harder for other countries to talk tough on the subject.
Most of the dozen or so senior diplomats who spoke to the FT on the matter said Britain’s willingness to downgrade human rights was unlikely to help it deal with Beijing, which would only sense weakness in its about-face.
Another European diplomat said that by agreeing to allow more Chinese investment in its telecoms, nuclear and banking sectors as a way of getting back in Beijing’s good graces, the UK had given far more than any other European country would consider.
“It certainly appears that they have sold the store and what are they actually getting in return?” asked one senior diplomat in Asia.

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