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Magazine Says Schools and Banks Involved in Illegal Importing

August 12, 1985

PEKING (AP) _ Kindergartens, banks, newspapers and a farmer who pocketed $720,000 were among those involved in an illegal importing operation on Hainan Island, reports said today.

The report in the official magazine Peking Review provided more detail on the announcement May 31 that top government officials on Hainan had been fired, and that a large import and embezzlement operation had been cracked.

Officials have said that imported duty-free consumer goods were resold at double or triple prices during a period of a little more than a year that ended in March 1985.

Peking Review said the illegal trade in 3.3 million cars, color televisions, video recorders and motorcycles involved 872 companies and 88 government departments on Hainan Island, in Guangdong province.

″Even schools and kindergartens participated in the smuggled auto trade,″ the report said. ″Many cadres have been out rustling up loans for foreign exchange for the contraband.″

Bank branches took ″gratitude fees,″ cut-price cars and 20-inch color television sets for granting loans to the smugglers, the magazine charged.

The Hainan Daily newspaper made a profit of $1.48 million on import deals, it charged.

A total of 143 cases of alleged embezzlement, bribery and other economic crimes have been investigated, and four people have been accused of pocketing almost $350,000, it said. Farm worker Lian Bingzong made $720,000, the magazine claimed.

The head of Hainan’s government, Lei Yu, and his deputy, Chen Yuyi, were fired and other officials have been reprimanded for turning a blind eye to the operation, officials say.

Guangdong party boss Lin Ruo was quoted today by the official English- languag e China Daily as saying the car racket spread from Hainan to 44 Guangdong counties and many other provinces.

Hainan is an undeveloped, tropical island lying between Vietnam and the Philippines in the South China Sea.

Since 1980 as part of China’s opening to the outside world, Hainan has been allowed to import vehicles and 16 other luxury goods to speed up the island’s development. They were intended for use on Hainan only.

However, Chinese officials charge that with the complicity of local officials, enterprises from schools to government offices turned themselves into importers.

Claiming they required vehicles and other items themselves, they took out bank loans in domestic Chinese currency and acquired $570 million in foreign exchange to buy the contraband from Hong Kong and elsewhere, the officials charge.

They resold the goods elsewhere in China and some items changed hands several times at escalating prices, as departments elsewhere turned a quick profit, the officials say.

Of the 89,000 vehicles illegally imported, 57,000 were reclaimed and 45,000 now have been sold at normal prices, they say.

Party Secretary Lin said the problem was ideological and political, as well as criminal, implying that confusion over directives to ″invigorate the economy″ misled some officials.

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