China’s first ever aircraft carrier was originally purchased from the Ukraine to be a floating casino in Macau. After a series of secretive deals led by an ex-basketball player, a towing expedition through Turkey, and years of development, China finally finished its first aircraft carrier. The carrier is named after the coastal province of Liaoning, located in northeast China.
Last month, the Liaoning was dispatched for the longest exercise training in history. It crossed the Miyako Strait between mainland Japan and the Ryukyu Islands, bypassed the eastern sea of Taiwan, and descended to the South China Sea, near the Nansha Islands, ending its voyage in Qingdao.
The Liaoning’s passage near Japan and Taiwan, and far from China’s own shores, raised concerns from the U.S. military. Japanese military drones also flew into the aircraft carrier’s air defense zone to take pictures to get a clearer view of the situation. Other countries were also concerned, following the Chinese carrier via satellites.
The U.S. Navy released a photo of a commander watching the Chinese carrier with his feet up. There was also a video of the Liaoning carrier’s plane taking off.
The Liaoning carrier was found to be stuck in Hainan Island for three days, which is very unusual for an aircraft carrier conducting a combat exercise. It was rumored that this was because of a problem with the Liaoning’s engine. Of course, as with many things in China, the real situation is unclear to the outside world.
Soon after the carrier was spotted, Song Xue, deputy chief of the Navy of the Communist Party of China, was dismissed, with Chinese government officials declaring his behavior a “serious violation of discipline and law.” He is the first Chinese military official to be dismissed due to serious violations. The fall of Song Xue may indicate that the highest officials in Beijing are extremely dissatisfied with the performance of the Liaoning.
What does Navy Admiral Song Xue have to do with the Liaoning carrier? The answer lies in the story of the Liaoning.
An Abandoned Soviet Ship in Ukraine
Soviet Russia originally commissioned the Black Sea Shipyard in Ukraine to build a Soviet Navy ship, the second Kuznetsov-class aircraft carrier. When the plans for the carrier were launched on Nov. 25, 1988, she was originally named “Riga” until July 1990, when she was renamed to “Varyag.”
After the fall of the Soviet Union in 1991, the aircraft carrier’s construction was abandoned. In 1997, Ukraine finally dismantled the engine and prepared to sell the Varyag as scrap. In 1998, a Chinese businessman purchased the ship to use as a floating casino, along with a full set of blueprints. This is the same ship that would go on to become China’s Liaoning aircraft carrier.
The Ex-Basketball Player and the Floating Casino
On March 19, 1998, Xu Zengping, a former Chinese Communist Party soldier and a veteran of the CCP’s Guangzhou Sports Industry Brigade who immigrated to Hong Kong, approached Ukraine under the name of a well-known Hong Kong business, the Chuanglu Group. He proposed a plan to build the carrier into a full ship in Macau.
The scrap ship sold for $20 million, a remarkably low price, the equivalent of a single fighter plane. Xu Zengping successfully won the bid, receiving its full set of design blueprints.
Later, a Chinese securities company with a military background, Oriental Huizhong, and the state-owned China Shipbuilding Industry Corporation, invested a lot of money and supervised the operation of a Macau law firm.
In June 2000, the “Varyag” aircraft carrier left the Black Sea Shipyard, first passing through the Bosphorus Strait and the Dardanelles to enter the Mediterranean.
Everything Goes Wrong
Once the ship arrived at the Bosphorus Strait, the Turkish government refused to allow its passage to the Mediterranean. Instead, the Dutch company responsible for towing the massive ship of scrap metal, sailed around in circles for 500 days.
For the inconvenience of having the ship stuck in their waters, the Turkish government charged a daily maintenance fee of $8,500, which accrued over the span of the 500 days.
Finally, in November 2001, the Chinese regime intervened and the ship left Turkey, arriving in Dalian, China, in March 2002, four years after the original purchase.
In August 2004, the Chinese regime paid 878 million yuan ($1.3 billion) to Chuanglu Company. The Dalian Shipyard of China Shipbuilding Industry Corporation then officially carried out research and continued construction and renovation from 2005.
Xu Zengping Scrapes Together Money
The former basketball player Xu Zengping, who originally bought the ship from Ukraine for the apparent purpose of creating a floating casino, turned out to be acting on behalf of the CCP Navy in one of the largest secret deals in Chinese military history.
He Pengfei, the deputy commander of the Chinese Navy, spent months persuading Xu Zengping to buy the unfinished ship from Ukraine, positioned as an opportunity to buy China a Navy carrier. According to an interview Xu gave to the South China Morning Post, the Navy commander had taken him by the hand and said, “Please do me a favor: Go and buy [the carrier] and bring it back for our country and our army.”
To purchase the ship, Xu had to sell his luxurious home in Hong Kong and take out multiple loans and mortgages to finance the purchase of the ship and operations of the company he created for the transaction.
The truth is, Beijing did not agree to this transaction. At the time, the Military Aid Trade Office of the Central Military Commission reported it to the highest level of the central government and requested the approval of the project. It was ultimately denied by the CCP Premier at the time, Zhu Rongji.
According to Xu, the lack of official government support meant that he was never fully refunded for his purchase and forced to bear the brunt of the financial burden for the purchase. Due to the closed-nature of the CCP, nobody can be certain what financial transactions and links occurred to bring the ship to China.
Varyag was officially turned into the Liaoning ship in 2004. After the CCP rebuilt the ship, installed the engines, and completed testing, it was reported to have cost over 20 billion yuan ($30 billion).
He Pengfei, the deputy commander of the Navy has since passed away, but his influence on the CCP’s military, especially in regards to military equipment, is still sizable.
Song Xue was originally He Pengfei’s secretary in the General Armament Department of General Logistics. He Pengfei later transferred into the Navy and brought Song Xue along with him, as Song Xue was his right-hand man. Song Xue was deeply involved in the subsequent operations of the Liaoning, including the equipment for the aircraft carrier itself and equipment for the carrier aircraft.
Everyone knows the corruption within the Chinese military, but the real corruption lies in the logistics and equipment departments.
Rear Adm. Jiang Zhonghua, the head of the equipment department of the South China Sea Fleet, committed suicide by jumping off a building, and Lt. Gen. Ma Zhongxiang, deputy political commissar of the Navy, also committed suicide in the same manner. Both cases involved corruption and equipment.
A friend of mine said that in the former logistics department, especially those senior officers in the General Armament Department, 20 out of 10 were corrupt officials, meaning that it included their wives and children. Hu Wenming and Sun Bo, the top leaders of China Shipbuilding Industry Corporation who were in charge of the reorganization, construction, and interior of the Liaoning, were both involved in corruption.
Song started in the General Armament Department and was responsible for the equipment of the Liaoning during that time. This is a high-level industry, and even if there is no corruption, it will inevitably have many ties with other departments.
Nowadays, Liaoning’s performance mishaps have embarrassed China, and the highest officials in Beijing are reportedly furious. They are searching for someone to be held accountable. Song Xue has likely suffered from the consequences of this. I fear others linked to the carriers will never eat again.
Alexander Liao is a columnist and journalist in research on international affairs in the United States, China, and Southeast Asia. He has published a large number of reports, commentaries, and video programs in newspapers and Chinese financial magazines in the United States and Hong Kong.
Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.