Yilishen Commits Fraud, Goes Belly Up: Authorities Stick to a High Standard to Cover Up News – China Times

An article in the China Times posits that the health supplement brand Yilishen had “powerful and mysterious political connections,” which contributed to the scandal in which thousands of ant farmers lost all their money. Following large-scale demonstrations by the farmers, news about the incident has been tightly controlled inside China.

From Taiwan’s China Times (中国时报), translated by CDT (With thanks to Japhet Weeks for the translation):

Yilishen commits fraud, goes belly up: Authorities stick to a high standard to cover up news

Using Zhao Benshan, the famous comedy actor, as its spokesperson, Yilishen was well known for a time. But recently a case of fraud has caused the company to go belly up, and tens of thousands of ant farmers, who were hoping to get rich quick but ended up losing everything, have clashed with the police in an effort to get Liaoning’s provincial government to resolve the issue. The fact that the Chinese authorities stuck to a “high standard” in covering up news reports of the incident, as well as the way events progressed, both seem to indicate that there were likely powerful and mysterious political connections at play behind the scenes.

The Yilishen incident and the Shizimei incident in Taiwan share elements in common. Merchants vigorously promoted Shizimei as easy to raise and highly profitable, which sparked a buying frenzy. But as soon as people realized it was impossible to turn a profit, it was already too late for them to recover their investment. Then in 1999, in Shenyang, Wang Fengyou set up Yilishen. He flaunted the process of extracting Polyrhachis vicina Roger powder from ants for use in a variety of products including male virility drugs, sleeping pills, beauty products, health supplements, etc; that’s why he needed large numbers of farmers to start cultivating ants.

Raising ants isn’t difficult. All you have to do is give them water and food at the right time. However, in order to raise Yilishen ants, you needed to first put down a cash deposit. According to the ant farmers, the rate of return on investment could be as high 32.5 percent. Returns that high were pretty tempting, which led a fair number of Liaoning’s peasant farmers to switch over to ant farming. According to data collected in August of last year, the number of ant farmers grew at a rate exceeding 40 percent, and the total number of registered farmers reached 270,000. The average household invested 42,000 yuan, and nearly a million households across the province were involved.

Several years later, Wang Fengyou had managed to illegally collected 15 billion yuan. Now his company has gone bankrupt and it’ll be hard to clean up the mess he’s made. On November 20, penniless ant farmers went to Yilishen’s headquarters to demand a refund; after they failed, they marched to the seat of Liaoning’s provincial government, and their numbers swelled. Liaoning authorities mobilized more than 1,000 riot police to suppress them.

But there were red flags early on that indicated Yilishen might end up in trouble one day. In November of 2004, the United States Food and Drug Administration noticed that Yilishen contained ingredients similar to those found in the erectile dysfunction drug Viagra. Even as early as 2003, the Japanese Ministry of Health came out with similar findings. And yet in spite of this, China’s Commerce Department awarded Yilishen a place on a prestigious list of businesses that exemplify China’s second wave of its reform and opening up-policy. At that time, the head of China’s Commerce Department was Bo Xilai, who’s well connected in Liaoning Province.

After the Yilishen story broke, China’s crackdown on related news was impressive. Now when you enter Yilishen into Chinese search engines like Baidu and Google, it produces no results. Which causes one to wonder why the government would go to so much trouble to prevent people from reading about an incident if it’s really just a financial dispute between Wang Fengyou and the ant farmers.

This additional tidbit may help to answer that question. On October 11, ant farmers still hadn’t received payment; Yilishen promised that they would be paid on November 29. On October 27, Wang Fengyou sent out an open letter stating that they would receive a large payment on November 20. In hindsight, it appears that Wang Fengyou tried to postpone an unsavory incident from occurring during the 17th Communist Party Congress, which ran from November 15-21. On November 20, the farmers still hadn’t received any money, and a conflict broke out in the streets, but by then Liaoning Province’s Committee Secretary, Li Keqiang, had already secured himself a seat on the Politburo Standing Committee. Whether there is some connection between these political associations and the tempo at which Wang Fengyou handled the situation, we’ll just have to wait and see. [Full text in Chinese]

December 8, 2007 4:21 PM
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