How a Fake ‘State-Owned’ Company Scammed $4.3 Billion: What Every Foreign Investor Should Verify Before Trusting a Chinese Partner

In April 2026, a Chinese court sentenced Liu Bi’an to life in prison. His crime wasn’t a one-off swindle—it was a decade-long impersonation of a state-owned enterprise (SOE) that siphoned over 31.4 billion yuan (roughly $4.3 billion) from ordinary people. When the scheme collapsed, 6.1 billion yuan ($830 million) was still missing. Many victims had handed over their medical savings, pensions, and even bank loans, convinced they were investing in a company backed by the Chinese government.

If you’re running a business outside China and ever plan to engage with a Chinese supplier, partner, or investment opportunity, this case should stop you in your tracks. Fraudsters don’t just target locals—they also court foreign firms who hear the words “central enterprise” and assume that means ironclad security. The Zhongzhan Group (中战集团) scandal is a masterclass in how a carefully constructed fake identity can fool thousands of people. In this article, we’ll walk you through exactly how the illusion was built, the red flags that were overlooked, and the practical steps you can take today to verify any Chinese company before you commit money or sign a contract.

Why “State-Owned” Is a Magic Word in China

Before we dissect the forgery, let’s understand why pretending to be a state-owned enterprise is such a powerful con in China—and why it matters for foreign businesses.

In China’s economic landscape, state-owned enterprises (国有企业) and especially central enterprises (央企) are seen as the backbone of the national economy. They enjoy preferential access to credit, government policy support, and an almost unspoken public assumption that they will never be allowed to fail. For an ordinary Chinese citizen, putting savings into an investment product labeled “央企” feels like depositing money into a government-backed vault. For an international company, signing a contract with what appears to be a Chinese SOE can feel like the safest bet in an unfamiliar market.

Scammers know this. In recent years, China’s State-owned Assets Supervision and Administration Commission (SASAC) has publicly listed more than 800 fake state-owned enterprises across multiple batches. Some forge official seals; others create shell holding companies designed to mimic genuine state-owned structures. The Zhongzhan Group took the deception to a whole new level.

Inside the Illusion: The Three Layers of Fake Credibility

Liu Bi’an’s fraud wasn’t a single lie. It was a carefully engineered mirage with three distinct layers, each designed to silence a different type of skepticism. If you understand how these layers worked, you’ll know exactly where to look when evaluating your own Chinese business counterpart.

Layer 1: The Fake Shareholder and the “Public Institution” Charade

In 2017, Zhongzhan Huaxin Group (中战华信集团有限公司) changed its shareholder structure so that 100% of the company was owned by something called the “Public Opinion Strategy Research Center” (舆情战略研究中心). This entity was registered as a public institution (事业单位)—a category that in China often carries government affiliation. The company then told investors, and even secured a legal opinion letter from a respected Hunan law firm, that this made it a fully state-owned enterprise. After all, if your sole shareholder is a government-affiliated institution, you must be state-owned, correct?

Incorrect. The research center was little more than a paper entity with a sparse, outdated website and ambiguous functions. In 2023, the National Public Institution Registration Administration revoked its registration entirely. The “center” was never a functioning state organ, and its connection to the company was a vehicle designed to exploit the trust people place in the word “事业单位”. The name “中战华信” itself was chosen to echo powerful state-sounding terms: “中” (China), “战” (strategy), and “华信” (Chinese trust).

Layer 2: Real Industry Assets That Looked Substantial

A pure paper company is easy to spot. So Liu Bi’an’s group built a portfolio of tangible, visible assets. They operated physical jewelry stores under the brand “Marilyn” in Changsha, complete with a sparkling showroom that you could walk into. They held a controlling stake in a carbon materials company. Most impressively, in 2023 they obtained a mining license for a rubidium-lead-zinc polymetallic deposit in Yizhang County, which the group’s promotional materials valued at “over one trillion yuan”. For investors, these were proof of substance—a real business with hard assets.

Later investigations painted a different picture. The mining site’s valuable metals had been largely extracted, and there was no established market price for rubidium ore. The trillion-yuan figure was fantasy. The jewelry business was a front. The physical presence, however, had done its job: it convinced thousands of investors that this was a company too big and too solid to fail.

Layer 3: Addresses That Whispered “Official Power”

Zhongzhan Group listed its address on the 29th floor of Zhonghai Plaza in Beijing’s central business district—a premium office tower overlooking the diplomatic quarter. It also listed a second address: Building 16 of the Diaoyutai State Guesthouse (钓鱼台国宾馆). For anyone unfamiliar with Beijing’s geography, Diaoyutai is one of China’s most exclusive state reception venues, hosting foreign dignitaries and high-level summits. The implication was clear: this company had access to the highest echelons of power.

In truth, the Diaoyutai address was simply the registered location of the sham “research center” shareholder. The company didn’t actually operate from there. But by seeding this detail into their corporate profile, they borrowed an aura of legitimacy that made questioning their state-owned status feel almost disrespectful.

The Red Flags Anyone Could Have Spotted

With the benefit of hindsight, the cracks in the façade seem obvious. Yet during the nearly ten years the scheme operated, thousands of investors—and some institutional players—missed them. Here are the warning signs that a proper due diligence process would have uncovered.

Beyond Zhongzhan: The Broader Epidemic of Fake SOEs

The Zhongzhan case is extreme, but not isolated. Fake state-owned enterprises have been discovered in construction, energy trading, cross-border consulting, and even vaccine distribution. They typically present polished business licenses, slick websites, and well-rehearsed origin stories. Some even manage to appear temporarily in local government procurement directories.

For foreign companies, the risk is magnified by distance. A business card that reads “China National XX Group” may look authoritative from 10,000 kilometers away. But SASAC’s repeated warnings are unambiguous: if an entity claims to be a central SOE and isn’t on the official list, it’s fake. The Chinese government has also established an online platform for reporting suspected fake state-owned enterprises, making it clear that this is a recognized problem.

How to Verify a Chinese Company: A Practical Checklist for International Businesses

The good news is that China has built some of the world’s most comprehensive public business registries. The challenge is that most are available only in Chinese and require a certain familiarity to navigate effectively. Here’s a straightforward checklist you can use before entering into any significant relationship with a Chinese company.

What This Means for Your Business

The Zhongzhan Group era finally ended with a life sentence for its mastermind and criminal penalties for 15 other individuals. Yet more than $830 million in losses will likely never be recovered. The victims were everyday people who trusted a label. For a foreign business, the cost of a similar oversight could be a failed market entry, a stolen advance payment, or a supply chain that turns out to be a phantom.

We’ve seen too many cases where an overseas company realizes months into a partnership that its Chinese counterpart’s “state-owned” claim was fabricated. By then, deposits had been paid, production lines had stalled, and legal recourse was mired in complexity. The antidote is always the same: verify before you trust.

At ChinaBizInsight, our entire focus is helping international businesses and individuals see the facts clearly. We retrieve official enterprise credit reports, compile multi-source due diligence reports, and assist with document authentication so that you can make decisions based on verified records—not polished pitch decks. Our mission is to help you Know Your Chinese Partners before it’s too late.