A young couple look at air-conditioners in a Kelon shop in China.
Gu Chujun bought Kelon, once a loss-making state-owned enterprise in 2002

China’s top court has overturned a fraud conviction against an electronics tycoon who had been jailed for 10 years, as Beijing seeks to boost private sector sentiment by reassuring entrepreneurs.

Gu Chujun, who is the second of a group of three prominent businessman to have their cases retried by the supreme court, pioneered the manufacture of CFC-free refrigerators and was one of China’s richest men in the early 2000s when he was a key player in the country’s nascent capital markets. He was jailed in 2008 for accounting fraud and embezzlement. 

The court said that Mr Gu, former chairman of home appliance maker Kelon, had falsified company accounts, but that his activities did not constitute crimes as they did not have a “serious negative social impact”. It upheld the other verdict that Mr Gu embezzled Rmb290m ($43.2m), but said the crime merited a jail sentence of only five years.

The supreme court vowed in 2017 to retry three high-profile cases involving entrepreneurs, including Mr Gu’s, in what local observers saw as an attempt to reassure business owners after the growth rate of private sector investment plunged from about 30 per cent in 2012 to little more than 2 per cent in 2016.

Last year the court ruled that another of the three, Zhang Wenzhong, founder of grocery chain Wumart, was innocent of charges of fraud, bribery and embezzlement for which he was jailed for 12 years in 2009. A further case is awaiting a final verdict.

Mr Gu was ranked as China’s 20th richest man by Forbes in 2001 with a $236m fortune and made a series of acquisitions in the early half of the 2000s that saw him gain control of five listed companies. Mr Gu bought Kelon, once a lossmaking state-owned enterprise, in 2002.

Economists say that state-owned companies have become increasingly dominant during the tenure of President Xi Jinping, who has also overseen a fierce crackdown on corruption that has encouraged wealthy people to move assets overseas. 

Speaking before the verdict, Mr Gu told the FT that if the embezzlement charge was upheld it would be “totally against the central government’s policy of protecting private enterprises and protecting private entrepreneurs”. 

However, Joe Zhang, a former UBS analyst who was sued by Mr Gu in Hong Kong for writing a critical report about one of his businesses nearly 20 years ago said: “There are many cases of unfair judgment for sure. But there are better cases to retry than this.

“The dominance of the state sector and the many unlevel playing fields are plain to see,” he added.

China’s ruling Communist party remains firmly in control of the country’s courts, making it difficult to convince entrepreneurs that they will be treated equally when clashing with state-owned companies or local governments.

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