Recently, the Sunshine Group in Jiangsu Province, hometown of former Chinese Communist Party leader Jiang Zemin, has once again been fined heavily by the authorities. Analysts believe that the repeated investigations and penalties imposed on the Sunshine Group indicate escalating power struggles within the top echelons of the Chinese Communist Party, as well as a purge of Jiang Zemin’s family’s business interests.
On the evening of May 7, ST Sunshine (600220.SH) issued a statement announcing that it had received a notification from its controlling shareholder, Jiangsu Sunshine Group Co., Ltd., that the Sunshine Group is facing a fine of approximately 230 million yuan (about 32 million U.S. dollars) from the China Securities Regulatory Commission for suspected insider trading of stocks.
On May 8, ST Sunshine’s stock price fell for the third consecutive trading day, dropping by 5.07% to 1.31 yuan per share (about 0.18 U.S. dollars), reducing its market value to approximately 2.3 billion yuan (about 318 million U.S. dollars).
Public records show that the former controlling shareholder of Jiangsu Sunshine was Lu Keping. Prior to the fine imposed on the Sunshine Group this time, Lu Keping had already been investigated by the CSRC and is currently still under investigation.
Lu Keping once controlled several listed companies, including Jiangsu Sunshine, Huarun Suntech, and Sihuan BioPharmaceutical. Sunshine Group, under his control, was involved in multiple industries such as textile clothing, biomedicine, medical devices, ecological agriculture, real estate, and metal products. In 2022, Lu Keping’s wealth reached 9.5 billion yuan (about 1.315 billion U.S. dollars), ranking 663rd on the Hurun Rich List. In 2023, Sunshine Group’s operating income reached 52 billion yuan (about 7.195 billion U.S. dollars), ranking 239th among China’s top 500 private enterprises.
The CSRC stated that Lu Keping had manipulated the stock price of Sihuan BioPharmaceutical by using 19 accounts for transactions, allowing him to expand his voting rights and become the actual controller of the company as early as May 23, 2014. However, Sihuan BioPharmaceutical claimed in its annual reports from 2014 to 2018 that the company had “no actual controller,” indicating false information, and Lu Keping secretly controlled the listed company for five years.
In May 2020, Lu Keping was fined 27.34 million yuan (about 3.7831 million U.S. dollars) by the CSRC and was banned for life from the market. He was later publicly reprimanded by the Shenzhen Stock Exchange.
As for Jiangsu Sunshine, it received a warning letter from the Jiangsu Provincial Securities Regulatory Bureau in May 2022 due to inaccurate disclosure of inventory in its 2021 semi-annual and quarterly reports, as well as irregular financial accounting leading to inaccurate financial data disclosure.
In April 2022, despite having only 400 million yuan (about 55 million U.S. dollars) in assets, Jiangsu Sunshine planned to invest 20 billion yuan (about 2.767 billion U.S. dollars) in the photovoltaic new energy industry chain project, prompting regulatory scrutiny for suspected stock price manipulation.
On the evening of September 14, 2022, Jiangsu Sunshine announced that the company was under investigation by the CSRC for suspected illegal disclosure of information.
In October 2023, both ST Sunshine and Sihuan BioPharmaceutical announced that Lu Keping was under investigation by the CSRC for alleged securities market manipulation.
In December 2023, Jiangsu Sunshine, Sihuan BioPharmaceutical, and Weichuang Co., Ltd. collectively announced that Lu Keping was under investigation by the CSRC for suspected illegal information disclosure.
According to financial data as of the third quarter of 2021, Jiangsu Sunshine had an asset-liability ratio of 51.5%, a cash flow of -40 million yuan (about -6 million U.S. dollars), with net cash flow from financing activities at -270 million yuan (about -37 million U.S. dollars). The company had only 420 million yuan (about 58 million U.S. dollars) in monetary funds, while its short-term borrowings amounted to 1.842 billion yuan (about 255 million U.S. dollars), putting significant pressure on debt repayment.
Therefore, Jiangsu Sunshine has been borrowing to pay off debts over the years. In 2020, the company borrowed 2.17 billion yuan (about 300 million U.S. dollars) and used 2.09 billion yuan (about 289 million U.S. dollars) to repay debts, while in the first three quarters of 2021, it borrowed 1.48 billion yuan (about 205 million U.S. dollars) and used 1.65 billion yuan (about 228 million U.S. dollars) for debt repayment. The money borrowed in 2021 was not enough to cover the old debts. Of the 12.69% stake that Jiangsu Sunshine Group holds in listed companies, 85.7% are pledged; Lu Keping’s wife, Yu Qinfen, has all her shares pledged.
In June 2023, Jiangsu Sunshine announced that, as part of a family arrangement, Lu Keping’s 66.7925% stake in Sunshine Holdings and all corresponding equity were transferred to his son, Lu Yuming. However, just as the transfer of ownership was not yet completed, Lu Keping, the actual controller, was suddenly investigated. Jiangsu Sunshine stated that the investigation was directed at Lu Keping personally and the change in the company’s actual controller is still in progress.
Lu Keping and former Chinese Communist Party leader Jiang Zemin are both from Jiangsu Province. On April 20, 1998, Jiang Zemin visited the Sunshine Group in Jiangsu town, praising the company. The official Chinese media has reported on interactions between the two.
During Jiang Zemin’s tenure, as a private entrepreneur from a town in Jiangsu, Lu Keping expanded into Beijing to enter the biomedical system. In 2001, Jiangsu Sihuan BioPharmaceutical Co., Ltd. acquired Beijing Sihuan BioPharmaceutical Co., Ltd., becoming a Chinese military pharmaceutical and biological enterprise.
Beijing Sihuan BioPharmaceutical Co., Ltd. was established in 1988 and is a high-tech enterprise in China engaged in the research, pilot production, manufacturing, and sales of genetic engineering drugs and diagnostic reagents. It is also one of China’s bases for genetic engineering drug production.
One of the company’s main products, “Delu Sheng” (recombinant human interleukin-2 for injection), is a new biological product classified by the Chinese government and has received various national awards, including the second-class award for technological progress in the military in 1995. This demonstrates the military background of Beijing Sihuan BioPharmaceutical’s products.
Political commentator Li Yanming stated that during the period when Jiang Zemin was in power, his son Jiang Mianheng and the Shanghai clique controlled the biomedical system, Lu Keping’s Sunshine Group, as a nominally Jiangsu private enterprise, unusually acquired the military-backed Beijing Sihuan BioPharmaceutical. This demonstrates significant political influence, with hidden support from Jiang Zemin, the Jiangsu clique, and the Shanghai clique.
Li Yanming believes that in recent years, Lu Keping and the Sunshine Group have been repeatedly investigated and penalized, indicating an escalation of power struggles within the Chinese Communist Party’s top ranks and a reshuffle of political and economic interests. This has also become a significant case of the Jiang Zemin group and even his family’s business interests being cleansed.