China 'never paid businessman' who bought aircraft carrier

China 'never paid businessman' who bought aircraft carrier

The Chinese businessman who bought an unfinished Soviet-era vessel that became his country's first aircraft carrier was quoted Tuesday as saying that Beijing never repaid the $120 million it cost him.

Entrepreneur Xu Zengping paid Ukraine a $20 million fee for the Varyag, which was eventually commissioned into the People's Liberation Army (PLA) Navy as the Liaoning. But the price ballooned once towing it to China -- a process that was delayed for years -- and other costs were included.

Xu also revealed that the ship was still fitted with its original engines at the time it was transported to China, contrary to reports.

Xu, a former PLA basketball player, was chosen to negotiate the acquisition, posing as a businessman who wanted to use it for a floating casino in Macau, and then giving it to the authorities.

But he told Hong Kong's South China Morning Post newspaper: "I still haven't received one fen (one hundredth of a yuan) from our government. I just handed it over to the navy."

After years of refurbishment the ship finally went into service in 2012, a symbolic milestone for China's increasingly muscular military.

View galleryA satellite image from the DigitalGlobe Analysis Center …

A satellite image from the DigitalGlobe Analysis Center of the Chinese aircraft carrier Varyag durin …

According to the SCMP, China considered buying the carrier outright in 1992 but declined, largely in order to avoid raising tensions with the United States, given that memories of the Tiananmen Square crackdown three years earlier were still vivid.

Around four years later, Xu was approached by Chinese naval officials to do the deal. They cautioned that the navy lacked funding and that Beijing did not support the project, telling him he would effectively be betting on government policy changing.

The report also highlights the close connections between some wealthy magnates and China's military, at a time when Chinese investment overseas is subject to increasing scrutiny.

It said little about the source of Xu's wealth, describing him as "Hong Kong-based" with interests in property and tourism, and said he was motivated by a desire to boost China's military development.

View galleryThis photo taken on September 24, 2012 shows China's …

This photo taken on September 24, 2012 shows China's first aircraft carrier, a former Soviet car …

The Varyag was a victim of the collapse of the Soviet Union, which left the Ukrainian shipyard building it in dire financial straits.

The ship's purchase, which was completed in 1999, was settled by Xu and its Ukrainian owners "over several days of alcohol-soaked negotiations", the newspaper reported.

Xu said the vessel's four Soviet-era motors were intact and "perfectly grease-sealed" at the time, contradicting reports that the sale was for little more than a hull and superstructure.

"The Chinese side deliberately released false information about the removal of the engines to make it easier for Xu and the shipyard to negotiate," the paper quoted a source familiar with the deal as saying.

But he was left relying on friends to lend him tens of millions of dollars to complete the operation, Xu said, adding that the navy declined to pay on the grounds it "didn't have the budget in the late 1990s because of China's poor economy".

The newspaper quoted an officially published book as saying Xu "bargained with the State Council for years over compensation, but Beijing would pay only the US$20 million auction price" -- without making clear whether it did so.

It also cited an anonymous source as saying Xu was saddled with the costs because naval officials who had asked him to take on the mission had either died or were in jail.

China's foreign ministry spokeswoman Hua Chunying said she was "not aware of the matter" when asked about the report at a regular briefing on Tuesday.

Xu said: "I was chosen to do the deal. I realised it was a mission impossible because buying something like a carrier should be a national commitment, not one by a company or an individual."

He added: "I didn't feel real relief until it was formally commissioned by our navy 12 years later. The feeling was like finally seeing my child grow up and marry."