"We saw the helicopter circle over the area several times. Sometimes we also saw men in suits step out of expensive cars and inspect the area," said Liu Yuenguang, who owns the lone eatery in the fishing village.
"They came with police cars ahead of them to clear road traffic. At first, we didn't know who these important people were," Liu recalled.
Fenghao is about a five-minute walk from the Shenzhou peninsula, which juts out into the South China Sea and is the site of a massive 10 billion yuan (RM$4.7 billion) project by Citic Pacific to build a mega tourist resort complex.
Citic Pacific is the Hong Kong-listed unit of the Citic Group, formerly the China International Trust and Investment Company, a state-owned investment firm established by the late Chinese vice-president Rong Yiren in 1979 with the approval of paramount leader Deng Xiaoping.
"We later learnt from the construction site supervisors that we were correct. The visitor was Yung, the son of Rong Yiren, who was coming here to check on the progress of the project," said Liu.
Liu's small seafood eatery, established two years ago in Wanning city, is an early beneficiary of the business already being lured to the island by the Citic project as well as an adjacent project proposed by its former chairman on five separate sites.
No stranger to controversy, Yung was forced to step down in April last year following disclosures of foreign exchange losses of US$1.9 billion (RM6.07 billion) that Citic Pacific had incurred under his leadership. His purchases of the five sites on the peninsula raised further troubling questions.
So, while Liu welcomes the boost to his business from the developments, he is concerned by the controversy surrounding it.
In Hong Kong, the Hainan land deals will be under the spotlight on Wednesday in the Legislative Council when an official of the Financial Services and Treasury Branch is due to respond to a question tabled by Democratic Party chairman Albert Ho Chun-yan, who wants to know whether the purchase by Yung of the five sites breached the city's listing rules and if they constituted connected transactions.
Citic Pacific shareholders will be equally keen to hear the answer to that question. They have meanwhile lodged a complaint with the Securities and Futures Commission (SFC), asserting that Citic Pacific management failed to act in the company's best interests at the auction of the sites at the Shenzhou peninsula by the Wanning city government.
Of the 12 plots of land on offer on the Shenzhou peninsula, Citic Pacific won seven, while two little-known private companies of Yung won five at an average price of only 700 yuan per square metre - a fraction of the current price for residential units in Wanning of 6,000 yuan per square metre.
The five sites secured by Yung's private firms Yao Xing Development and Di Guang Enterprise were designated for residential development, while the seven sites bought by Citic Pacific were designated for multiple uses. Citic Pacific paid 225 million yuan, or an average of about 740 yuan per square metre, for its sites.
Yung secured one of his sites by offering as little as 20,000 yuan above the minimum asking price set by the Wanning city government and paid a total of just 196 million yuan for all five sites, with a total area of 270,000 sq metres of gross floor area.
The timing of Yung's purchases has raised further questions, since they came just two weeks after he stepped down as Citic Pacific's chairman.
Angry shareholders have pressed the company's officials to disclose if the sites that Yung won in the Wanning land auction comprised a "leaving present" to its former chairman.
However, Citic Pacific, which struck a 70-30 profit-sharing agreement with the Wanning government for future profits it stood to make from the project, denied it entered into any improper deals with Yung over the sites.
Since the central government announced in December last year its plans to turn Hainan into a tourism destination by 2020, housing prices and land values on the island have shot up by more than 50%.
Liu said the Shenzhou peninsula, which is about a 2-1/2-hour drive from Sanya Phoenix International Airport, had been transformed from a village of about 4,000 fishermen five years ago into what was shaping up as a resort-entertainment complex complete with government-funded infrastructure and a planned railway link from Hainan's capital city, Haikou, to Sanya.
During a recent three-day visit to the peninsula by the South China Morning Post, we saw Citic Pacific's two five-star hotels planned for an eight-kilometre stretch of beach nearing completion and a nearby golf course ready to open soon.
Both hotels - the 307-room Sheraton Shenzhou Peninsula Resort and the 315-room Four Points by Sheraton - are scheduled to open as early as December this year.
Behind one of the hotels, construction work on 14 luxury residential towers is under way.
It was a bright, sunny day with temperatures up to 35 degrees Celsius, and not many workers were on duty. But several cranes were operating on the peninsula, and trucks loaded and unloaded concrete.
In 2005, Citic Pacific signed an agreement with the Wanning government under which it would serve as the primary developer of the 2.1 million sq metre holiday resort complex featuring hotels, luxury apartments, villas with private yacht piers, a retail and a water sports centre, golf courses and a convention centre.
Over the past five years, the company has invested some two billion yuan to build roads, utilities and sewerage on the development site.
The accessibility of the Shenzhou peninsula will also be greatly improved after the completion of a 308 kilometre Haikou-Sanya express railway, being built at a cost of 20 billion yuan and due to be completed in October.
"I overheard my customers talk about prices of luxury apartment projects currently being built on the peninsula," said Lui. "They said the units will be offered for sale for as much as 10,000 yuan per square metre in the next several months."
Lui believes his restaurant business will get even better as Citic Pacific's mega resort emerges in Wanning, which has a population of about 550,000 and an average wage of just 600 to 800 yuan a month.
Based on a local economy of agriculture and fisheries, Wanning remains a rustic city, with its tallest building no more than 11 storeys high.
Liu is looking at better days ahead. At the moment, the upcoming mega-resort is already helping him generate sales of about 10,000 yuan a month at his restaurant.
To cash in further on the rapid development of the peninsula and the likely arrival of more tourists in the area, Liu decided to invest 60,000 yuan in a glass-bottomed boat to offer visitors a view of the sea floor around the peninsula.
"After a seafood lunch in my restaurant, my boat can take them to the other side of the peninsula for a view of the beautiful coral reefs," he said, adding that he expects delivery of his boat in two months.
While hardly in the same league, Liu is a winner, just like Yung, from the mega-developments that will soon rise on the 12 sites sold by the Wanning government on the Shenzhou peninsula.
Yung and Citic Pacific appear to have been the only bidders for all 12 sites.
According to the Wanning city government's website, Yung's successful bids to secure five sites were between 20,000 yuan and 80,000 yuan above the Wanning government's minimum selling prices.
The largest of the sites that he won, with an area of 150,692 sq metres, cost him 47.70 million yuan, or just 50,000 yuan above the government's floor price of 47.65 million yuan. The site is designated for luxury villas with private yacht piers.
Citic Pacific won five of the sites at the minimum prices set by the government. One of the plots was secured for 41.45 million yuan, or just 10,000 yuan above the 41.44 million yuan floor price.
The conglomerate, however, secured another 49,191 sq metre residential site for 19.20 million yuan, 4,000 yuan below the 19.24 million yuan floor price, according to the auction results posted on the Wanning government website.
Lawmaker James To Kun-sun said it did not make sense that Citic Pacific was defeated by Yung by small margins, as the Shenzhou peninsula is the company's largest property investment. The 2.1 million sq metres it acquired on the peninsula represented 41% of Citic Pacific's total 5.1 million sq metre land bank, the company disclosed in its latest annual report.
To said he would now press Citic Pacific to disclose if management discussed or finalised its bids for the 12 sites on the peninsula before Yung's resignation last year.
"There is possible breach of fiduciary duty in these transactions, and the SFC should come in and conduct an investigation," he said.
Under Hong Kong regulations, a breach of fiduciary duty might arise in the event that a director of a listed company gets to hear in advance what his company plans to bid for a project and if his personally owned company then secures the contract for the project by offering a slightly higher price than what was offered by the listed company.
An SFC spokesman said the commission does not comment on individual cases.
James To and Albert Ho are meanwhile providing legal advice to Citic Pacific's minority shareholders in their fight for compensation over the huge foreign exchange losses the firm incurred late in 2008.
"We are also in talks with shareholders' representatives about writing to China's National Audit Office - a unit under the State Council - to ask for help if no progress is achieved in Hong Kong," said To, who noted that Hong Kong police had been investigating the foreign exchange losses for 20 months but had so far made no announcements.
Citic Pacific is 58% held by the State Council's wholly owned investment company, Citic Group.
To said Citic Pacific owed its shareholders answers to the questions whether the auction resulted in a loss for the company and whether there was a secret deal with Yung.
He hoped the controversy might put pressure on the Hainan Ministry of Land and Resources to examine the process of the land sale to Yung
"We have questioned the Citic Pacific management at its annual general meeting on May 14. They still owe us an answer," To said.
Chen Wangying, an official at the Wanning Land and Resources Bureau, which was responsible for the land auction on the Shenzhou peninsula, said he could not remember how many bidders took part in the auction, since it was held a year ago.
"As far as I recall, some sites only got one bid, while some got two bids. The land sale did not breach government regulations, and the auction was open to the public, and the sites sold to the highest bids," he said.
The price obtained of about 700 yuan per sq metre for the five sites was not considered low at the time, amid the global financial crisis.
"We, of course, wanted the land to achieve as high a price as possible, but not many companies registered as buyers," he said.
According to the agreement with Citic Pacific, as the primary developer of the sites, Chen said the Wanning government and Citic Pacific would share the net profit from land sales.
Asked why the Wanning government agreed to sell the biggest site to Yung's private companies, which have no track record in building large property developments, Chen said there was no specific requirement for bidders.
"If we only received one bid, the land would be sold to the highest bidder or a bid that matched the floor price," he said.
"When there are two firms competing for one site, the winner will be the highest bidder."
But he did not explain why Citic Pacific had won one residential site at below the government's asking price.
"Detailed information could be accessed at our archives office with the approval of the lin dao [supervisor]," Chen said.
The Post visited the archives office on June 11. We were told by a woman to present a letter signed by the lin dao when we explained our intention to check the number of bidders at the land auction.
"Who is the lin dao we need to approach?" we asked.
"Our lin dao is Chen," she said.
We then returned to Chen's office, but his door was locked.
Citic Pacific chairman Chang Zhenming said earlier that he had been told by Hainan officials they wanted the development of the resort accelerated.
He added that Citic Pacific had sold part of its land in the resort to China Poly Group, a large state-owned enterprise linked to the family of the late Chinese paramount leader Deng Xiaoping. -- South China Morning Post
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