Asia’s ‘Aluminum Tycoon’ Collapses After Three Decades

(L-R) China's Liaoning province Deputy Governor Liu Guoqiang, China Zhongwang Holdings Chairman Liu Zhongtian, and Hong Kong Stock Exchange Chairman Ronald Arculli toast just after trading started at the stock exchange in Hong Kong on May 8, 2009. Mike Clarke/AFP via Getty Images

China Zhongwang Holdings Ltd., founded by Liu Zhongtian, was forced to delist from the Hong Kong Stock Exchange on April 13.

Liu was a 14-year-old school dropout from rural China who borrowed 200 yuan (approx. $29) to start a business and eventually became known as Asia’s “aluminum tycoon.” He was the wealthiest man in Northeast China at one time.

Liu experienced all the ups and downs of the ever-changing Chinese Communist Party (CCP) during his career trajectory over the past three decades.

In the early 1980s, when China’s planned economy reached a dead end, the CCP started reforms toward a market economy by implementing a dual-track price system. Many businessmen who knew how to work with officials could buy goods at a fixed low price and sell them at the market price, which resulted in China’s oligarchy getting rich overnight. However, China’s economy became chaotic, and that era was marked by collusion between government officials and business sectors.

Liu’s Early Success

In the late 1980s, Liu turned to industrial business. In 1989, he founded a chemical plant in Liaoyang City, Liaoning Province, at the age of 25. In 1993, he founded a Sino-Hong Kong joint venture company, Liaoning Zhongwang, specializing in producing aluminum profiles for construction, with a Hong Kong investor as a shell company that he owned 100 percent. At that time, the joint venture enjoyed additional tax benefits, facilitating the future listing of Zhongwang Holdings on the Hong Kong Stock Exchange.

In 1994, Zhongwang’s aluminum profiles for construction were officially launched in the market. Relying on the rapid expansion of China’s real estate industry, Liu’s aluminum profile business grew rapidly, and the company’s production capacity increased from zero to more than 100,000 tons in just three years. Liu was now a successful entrepreneur.

In 2001, Liu turned down U.S.-based aluminum company Alcoa Inc.’s acquisition plan for Zhongwang Holdings. He started to introduce industrial aluminum extrusion products to the market. By 2008, Zhongwang’s production capacity exceeded 530,000 tons, ranking third in the world and first in Asia. It partnered with many major international automobile manufacturers and is a major supplier of aluminum extrusion materials for the entire body of high-speed railroad rolling stock in China. Its products were widely used in construction, transportation, machinery and equipment, and power engineering.

In May 2009, China Zhongwang Holdings Limited was successfully listed on the Hong Kong Stock Exchange, marking the largest IPO in the global capital market since the subprime mortgage crisis in the United States, raising a total of $1.3 billion. As a result, Liu’s net worth soared to 24 billion yuan (about $3.5 billion) at that time, becoming China’s richest man.

China Zhongwang’s Downturn

While Liu was seeking to list his company publicly, he also joined the elite political club of the CCP, serving as a deputy to the CCP National People’s Congress for ten consecutive years from March 2003 to March 2013. That was the highest honor the CCP gives to private entrepreneurs.

Liu has entered the financial sector mainly through his shareholdings since 2011. As of 2018, he controlled nine financial institutions directly or indirectly through his other companies, including banks, insurance companies, and financial leasing companies. Liu then financed his businesses through these financial institutions.

However, in 2013, Liu’s career started to take a downturn, and since then, he has failed to enter the National People’s Congress, where the CCP political elites gather.

In March 2013, CCP leader Xi Jinping took over the entire Communist Party, the Chinese government, and the military. The previous Hu Jintao regime ended along with the influence of former leader Jiang Zemin. The political and business sectors entered a turbulent period of struggles between the old and new factions within the CCP.

Under Xi, the era of collusion between the regime and the business sector ended, and the business sector became more involved in a political purge that affected many business tycoons.

After Zhongwang was listed on the Hong Kong Stock Exchange, Liu set his eyes on the international market. At that time, the Chinese regime promoted the “going global”  strategy for domestic enterprises and provided policy support and tax incentives.

Since 2009, the industrial aluminum produced by Zhongwang, with the help of government subsidies, started a worldwide price war and rapidly expanded its market share. In the second half of 2010, the U.S. Department of Commerce (DOC) launched an anti-dumping and anti-subsidy investigation of imported aluminum. In March of the following year, the DOC imposed high anti-dumping and anti-subsidy tariffs on aluminum profiles from China, with the anti-subsidy rate against Zhongwang reaching 374.15 percent. Since then, the total export volume of aluminum from China has dropped significantly.

Faced with the sudden change, Liu made a decision that led his company into legal jeopardy in the United States. Liu first established an aluminum processing plant in Mexico to avoid high tariffs imposed by the United States and then shipped industrial aluminum to Mexico from China. It was manufactured into aluminum pallets and sent to a warehouse in California to be reworked into saleable industrial aluminum.

In September 2016, the Wall Street Journal reported that an Alcoa executive hired a pilot to take aerial photos deep in the Mexican desert and shockingly discovered about 1 million tons of aluminum neatly arranged in a factory surrounded by barbed wire. The aluminum was worth about $2 billion, or about 6 percent of the world’s total, enough to produce 2.2 million Ford F-150 pickups or 77 billion beer cans.

After several years of investigations, the U.S. Department of Justice indicted Liu in May 2019, alleging that he and his partners provided funds to shell companies to purchase aluminum from China Zhongwang and then sold it to U.S. buyers, concealing the origin of the goods during the transaction, and thereby avoiding U.S. tariffs for ten years.

In April 2022, the U.S. District Court issued a ruling ordering companies associated with Liu to pay $1.83 billion in fines for their fraudulent activities and sentenced Liu to five years of probation.

When the DOC launched an anti-dumping investigation into imported aluminum, China Zhongwang was already in a financial crisis, with its stocks plummeting. The company was later ordered to suspend its trading in August 2021 due to its failure to disclose profit reports for the first half of 2021.

On April 13 this year, China Zhongwang was forced to delist from the Hong Kong Stock Exchange.