The magic power of ants

As we landed in Shenyang, the captain uttered the dreaded words: "The outside temperature is minus 18..."

Winter is bleak in northeastern China and few places more so than Shenyang, where after the collapse of state-owned factories, those who were once protected by the Communist "iron rice bowl" of job security now scrabble to survive.

The story we had come to investigate speaks volumes about the dangerously unregulated and corrupt nature of Chinese capitalism.

Eight years ago, an entrepreneur called Wang Fengyou started a business making aphrodisiacs and health potions from squashed ants. Most of his profit came not from product sales, but from fees which people paid to get boxes of live ants which they reared on egg yolk and cake.

After a fixed period, his agents would collect the now dead insects and the ant farmers would receive a 30 per cent return on their investment. Most ploughed it back into buying more ants, and so it went on.

This was a classic pyramid or Ponzi scheme, which depended on the recruitment of naïve people, many elderly, who didn't understand that capitalism rarely gives such high returns, and still believed that the all-powerful Communist government would step in if anything went wrong.

Wang Fengyou's official photographer was always on hand to snap him glad-handing important government officials. Thus he trumpeted that he had guanxi - connections - which gave investors confidence that he was protected.

Bribes, according to a business consultant who met him, were a regular overhead. He got himself a seat in the front row at the New Year Gala Spectacular, the most watched TV programme in China. (In the world, actually.)

He was filmed with celebrities who endorsed his products. He had his own talk show. In short, he was ubiquitous and it seemed nothing could touch him.

Until he went bust. And lost more than a million people's life savings.

You might have thought that the government would be concerned that a million people had been cheated of their money. But oh no. Police beat those who tried to protest and are now harassing those who speak out.

The ant farmers of Shenyang were more terrified than any other Chinese people I have met. None would let us use their names or show their faces.

An old lady, who had lost both her and her sister's life savings, shoved us into her flat so the neighbours couldn't see. She smoked nervously and pushed us out after a less than an hour. Her children had told her not to talk, it would bring more trouble.

In a nearby village, at first no-one would talk on camera. Some had already been beaten by plain clothes police when they tried to go to Beijing to petition the authorities.

After we left, those we had interviewed were briefly arrested. We kept changing sim cards so our calls would not be tapped. Our producer had secret assignations to collect video tape of protests.

The ant farmers are threatening to disrupt the Olympics, so no wonder the government is determined to stamp out their protest. But no wonder the famers are angry - they may have been naive or even greedy, but in the end, they are the victims of a disaster caused by corrupt officials and lack of a proper legal system.

As for Wang Fengyou, he's been arrested and imprisoned, but not for fraud. Instead, he's accused of instigating the protests by ruined investors, so has been charged with "disrupting public order and interrupting the traffic."

Which many Chinese officials, I suspect, would see as a far more serious crime.

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