Report extracted from the China Securities Journal / 21st Century Economic Report 18 June 2011, Title: Bank of Communication contest 50 million shares ownership / ST Lianyi corporate restructuring

"We can provide the most convincing evidence." Relate by the official person in charge, August 18, 1999, Chengdu Lianyi reported fraud case of Guangdong Flying Dragon to Chengdu police, but within the next day, Chengdu Lianyi Group Chairman Xu Huaizhong flew to Guangzhou, signed a tripartite agreement with Bank of Communication Guangzhou Jiangnan Branch, Guangdong Flying Dragon and Chengdu Lianyi. It should be noted that the agreement also includes a fourth party - the well-known Sanjiu Enterprise Group. The official commented: "Chengdu Lianyi purposely camouflage the truth and sign another transfer agreement with Guangdong Flying Dragon, a pot calling a kettle black, a fraudulent act of obtaining bank financing unlawfully."

The official had also produce photocopy of the agreement to the reporter. In the agreement, it exhibit the signature belonging to Bank of Communication Guangzhou Jiangnan Banch official representative (known as Party A), Guangdong Flying Dragon Group representative (known as Party B), and Chengdu Lianyi Group representative Xu Huaizhong (known as Party C). The agreement illustrate that: Guangdong Flying Dragon is supposed to repay Bank of Communication Guangzhou Jiangnan Branch the principal loan and interest amounting to 38 million yuan. To emphasize is that in this 38 million yuan loan, the Chengdu Lianyi Group has agreed 3 million yuan on behalf of Guangdong Flying Dragon Group; the remaining 35 million yuan loan will be service by Sanjiu Enterprise Group and paid directly to the Bank of Communication.

The main reason that this agreement was not being able to carry out in the end was due to the withdrawal of Sanju Enterprise Group from the deal.

In views of the charges made against Chengdu Lianyi and Guangdong Flying Dragon by Bank of Communication for defaulting loan repayment, reporter conducted phone verification with Chengdu Lianyi. Reporter had to painstakingly try all ways and means to get connected to the mobile phone of Chengdu Lianyi General Manager Mr. Zhou Guangjun. Mr Zhou denied the allegation by Bank of Communication Guangzhou Branch. However, when reporter seeks clarification with him, he refused the reporter's request.

According to the analysis by some legal experts, with Bank of Communication leading the mortgage possession claims, the tactic will be geared towards "Friendly Repossession Scheme". Guangzhou Dongshan Intermediate People's Court adhered to the application of creditors and freezes 5474.55 million shares equity according to the judiciary system. In regard to this, even the Judge of Chengdu Intermediate People's Court Mr Dong Yi concurred to this arrangement. Some market experts believe that the restructuring plan of Chengdu Lianyi and Zongshen will face obstacles.

However, no matter who is right or wrong, the whole Guangdong Flying Dragon event, left many unanswered questions, really thought-provoking.