The fall of East Star’ Lan Shili and Shenzhen’s Li Zeyuan

Lan and Li.jpgNormally, a jail term for tax evasion for the owner of East Star Airlines, a privately-owned Chinese carrier that went bankrupt in August last year, would not be of too much interest.

But Lan Shili’s case comes amid an attempt by the Chinese authorities to force its carriers to consolidate, and Air China’s interest in expanding its footprint in the domestic market.

The bankruptcy and jailing comes months after Air China’s offer for East Star was rebuffed by the latter’s owners. Air China then picked up East Star’s assets for a snip in November.

Separately, in March, Air China bought a majority stake in Shenzhen Airlines, months after Shenzhen’s majority shareholder Li Zeyuan came under investigation for “economic crimes”.

These events bring up two issues: it is increasingly difficult for privately-owned carriers to operate in China, and Air China is the biggest beneficiary of the Chinese consolidation.

Whatever Lan’s and Li’s crimes, it will be difficult to shake off the perception that the investigations are linked to the consolidation in the Chinese airline industry.

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5 Responses to The fall of East Star’ Lan Shili and Shenzhen’s Li Zeyuan

  1. Kinbin 15 April, 2010 at 8:55 am #

    Sadly, it is a reminder that the Chinese authorities possess a mindset reminiscent of a developing nations at its core. Business enterprises that are aligned to national and political initiatives are given the ‘rocket booster’ ride. Conversely, those who stand in the way gets steam-rolled over and mashed. Many developing entities are not different in the technique.

    That said, authorities in developed economies are not any different in intent either, but slick on the techniques to elbow entities out.

  2. Kinbin 15 April, 2010 at 8:56 am #

    Sadly, it is a reminder that the Chinese authorities possess a mindset reminiscent of developing nations at its core. Business enterprises that are aligned to national and political initiatives are given a ‘rocket booster’ ride. Conversely, those who stand in the way gets steam-rolled over and mashed.

    That said, authorities in developed economies are not any different in intent, but in the techniques.

  3. Kinbin 15 April, 2010 at 8:57 am #

    Sadly, it is a reminder that the Chinese authorities possess a mindset reminiscent of developing nations at its core. Business enterprises that are aligned to national and political initiatives are given a ‘rocket booster’ ride. Conversely, those who stand in the way gets steam-rolled over and mashed.

    That said, authorities in developed economies are not any different in intent, but significantly slicker in the techniques to elbow such entities out of the game.

  4. Siva Govindasamy 15 April, 2010 at 9:49 am #

    Ultimately, it is about what kind of style you prefer isn’t it? But here, there is a clear pattern being established – which is not good for those who want to do business in China.

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