DECEMBER 18, 2000 VOL. 156 NO. 24

Stephen Shaver/AFP for TIME. Singaporean businesswoman Shih Shia Wah says the involvement of Chinese Premier Zhu Rongji may prevent her from resolving her business dispute.

A Message from Above
Why is Chinese Premier Zhu Rongji intervening in a small-time Shenyang embezzlement case?
By MATTHEW FORNEY Shenyang

China's no-nonsense premier earned the nickname Boss Zhu by bringing the country's trillion-dollar economy to heel and stewarding it unharmed through the Asian financial crisis—not by micromanaging underwear shops. Yet on a recent evening after most of his staff had gone home, Zhu Rongji perused a letter passed on by one of his gatekeepers, defending a woman charged with embezzling from a clothing mall. In his usual quick, strong strokes, Zhu wrote in the margin that the case could chill the ardor of foreign investors and asked, "How can we speak of a legal system if people are casually detained?" He dated it Oct. 29, 2000. The letter worked like novocaine, numbing China's already weak legal system as it passed through the bureaucracy to the hands of local police, who had taken pride in the bust that capped their two-year investigation. "There was no question of random detentions," complains a frustrated investigator who saw Zhu's note, adding that the case can't be tried until somebody stands up to the Premier.

ALSO IN TIME COVER: The Best (and Worst) of 2000 When we look back, we'll remember Tiger Woods, Harry Potter and Sydney's Olympic gala BURMA: Commander-in-Waiting General Maung Aye stands ready to take over as hard-liner-in-chief, though he may have to beat out the country's top spy • Bringing the House Down: Suu Kyi and her brother face off CHINA: The System Isn't Working Premier Zhu Rongji's involvement in a business dispute in Shenyang epitomizes the nation's struggle with the rule of law INNOVATORS: New Lights of the Spirit From a multimedia bishop to the Chinese master of Fa Lun Gong, meet Time's religious visionaries for the millennium CINEMA: Off the Rails in Angkor Wat TIME goes tomb raiding with Angelina Jolie in Cambodia TRAVEL WATCH: For Every Paradise, There's a Parasite

China's effort to create an independent legal system hangs in the balance of cases like the one in Shenyang, a grim industrial city in a part of northeast China that was once Manchuria. The need for strong institutions will be even greater after the country's expected entry next year into the World Trade Organization, which could triple trade, encourage more foreign investment—and yield more commercial disputes. Yet the legal tussle in Shenyang shows that the same Communist Party leaders tasked with imposing rule of law often thwart efforts of those very offices to check the party's power. If that doesn't change, corruption investigations will remain what they are now: probes limited largely to officials who have fallen from favor or lost their political support. For instance, an investigation in the coastal city of Xiamen that resulted in the execution last month of 14 officials ceased after the wife of a Politburo member was implicated. The highest-level official ever executed for corruption, parliamentarian Cheng Kejie, was dispatched this year after losing the protection of former Premier Li Peng. In Shenyang, Premier Zhu weighed in only because one side in the commercial dispute had the political heft to drop a letter on his desk.

Ground zero in the case is the Five Loves Clothing Market City, a massive five-story edifice of cement and blue glass in the center of Shenyang's wholesale district, crammed with thousands of vendors pitching everything from thermal underwear to knock-off North Face jackets, much of it bound for Russia. The mall is the brainchild of Shih Shia Wah, a Singaporean who created the joint venture in 1993 and invested $4 million in cash and loan guarantees. She ceded control of the accounting books to a Hong Kong businesswoman, Gao Peixuan. "We were both Chinese ladies doing business, so I thought I could trust her," Shih says. According to the arrest order, Gao illegally transferred the mall's assets into another of her companies and was arrested in October. (Officials from Gao's Hong Kong-based company declined to answer questions.)

Thus began the scramble for connections. Shih, whose merchant family were early traders with China, reached a contact who was once China's trade minister. Shih climbed through the former minister's family tree and eventually hired as her representative—get ready—the nephew of the former minister's son-in-law's mother. A distant relative, to be sure, but that man, Wang Xinmin, was sufficiently well-connected to bring the case to cabinet staffers responsible for economic crimes.

Still, he was a step behind Gao's defenders, who had tapped into China's "secretary culture." Political secretaries in Beijing write their bosses briefs, choose who enters their offices and, most importantly, vet what they read. Even retired secretaries can open doors and, according to Wang, his adversaries won the support of the former secretary to Zhu's colleague, Politburo member Li Ruihuan. He lobbied inside the walls of Beijing's cloistered Zhongnanhai compound, where the top leaders live and work, and helped pass Gao's defense letter all the way to the Premier's desk. "The people in charge of the case now have to answer to Zhu," says Wang.

And so the case languishes while Shenyang struggles with a far bigger scandal, the largest currently being probed in China. Scores of investigators have descended from Beijing looking into malfeasance that makes the Five Loves imbroglio look like a schoolyard spat. In the past year, Beijing officials have arrested a vice mayor who ran up millions of dollars of debt during 17 gambling trips to Macau and paid them off with city funds; the mayor's recently divorced wife who cruised the city in a red Lincoln Town Car despite her low-paying job; a gangster accused of mass murder who served on the city council; and the city's second-highest judge. Meanwhile, on the top floor of the Five Loves market, next to a dealer of satin boxer shorts, Shenyang's economic police have set up an investigation center of 15 officers and a photocopy machine to root through Shih's case. On a recent day, the copy machine and everybody else stood idle. "Because of Zhu Rongji's words, they're at a loss," complains Shih. What she needs is a mailman who delivers.

With reporting by Isabella Ng/Hong Kong

Write to TIME at mail@web.timeasia.com