A-shares listed company Sheming Technology announced that its actual controller, chairman, and CEO Lu Yong has been placed under judicial detention by the Supervisory Commission of Qidong City, Jiangsu Province, due to his involvement in the shareholding enterprise Jiangsu Banbutang Real Estate Co., Ltd. This incident marks the latest case of senior executives of listed companies being investigated since the beginning of 2025, rapidly sparking fears among entrepreneurs in the market and business community.
Following the recent case of “Oceanwide Holdings,” governments across China have been taking frequent actions to investigate senior executives of large companies, with over a dozen high-profile detention incidents occurring in the first half of this year.
On the evening of July 28, Sheming Technology issued a statement clarifying that Lu Yong’s detention is related to his personal affairs and has no impact on the company’s operations, which are currently running normally.
Many industry insiders have pointed out that this incident is not an isolated case but rather a reflection of the challenging environment for private enterprises in China at present. A manufacturing entrepreneur in Nanjing, Jiangsu, using the pseudonym Wang Yong, told Dajiyuan on July 31 that under the backdrop of tight local finances and high anti-corruption pressure, some private enterprises had previously established relationships with local governments through “informal means” during the construction or operation phase. These “historical legacies” have now become the focus of investigations.
Wang Yong mentioned, “During the early stages of setting up a factory, it was necessary to establish various relationships with tax authorities and government departments, where wining and dining officials was almost a tacit rule. But now, instead of rewards, such actions are being used as grounds for punishment.” He emphasized that companies without official backgrounds are finding it increasingly difficult to navigate.
Lu Yong, the 51-year-old chairman of Sheming Technology, graduated from Southeast University and has led multiple new energy and cultural enterprises, including Jiangsu Fenghui New Energy, Jiangsu Huahui New Energy, and Jiangsu Banbutang Cultural Development Ltd. In February 2024, he acquired the controlling stake in Sheming Technology through two transactions totaling approximately 650 million yuan through his subsidiary companies and subsequently became the company’s chairman in the same year. However, less than a year later, he was subjected to detention, shocking the market.
Established in 2001, Sheming Technology is engaged in the research and development of color pulp, functional additives, and computer color matching systems, making it a high-tech company in China. In 2016, the company was listed on the Shenzhen Stock Exchange’s ChiNext board.
A private entrepreneur in Zhejiang using the alias Kang Yuan mentioned that in recent years, several private entrepreneurs in the areas of Jiangsu, Suzhou, and Wuxi have been taken away for investigation. He shared with Dajiyuan, “Among them are my friends, most of whom are accused of tax evasion, illegal transactions, or involvement with certain local financing platforms.”
Kang Yuan disclosed that to mitigate risks, he has relocated most of his factories to Southeast Asia, retaining only one domestically. He commented, “The news now only reports on listed companies, while incidents involving many small business owners often go unnoticed. Many are considering emigration or asset relocation.”
According to incomplete statistics, from the beginning of 2025 until now, at least 15 A-share listed companies have announced that their controllers or senior executives have been placed under detention for investigation. Most announcements vaguely state “assisting in investigations” or cite “personal reasons,” with few explicitly disclosing the companies involved in the cases like Sheming Technology. For example, on January 17, ST Zhongcheng announced that the company was under investigation by the China Securities Regulatory Commission for irregular information disclosure; on July 6, Lin Yanglin, chairman of Xinlicheng, was investigated by the Supervisory Organization of Xiaodian District, Taiyuan; and on the night of July 23, Zhongfu Information announced that chairman Wei Dongxiao was placed under detention by the Supervisory Commission of Shennongjia Forestry District.
Reports have revealed that since the beginning of 2025, five executives who were detained have chosen to end their lives under pressure. Chen Yang, a financial researcher in Beijing using a pseudonym, suggested that the Lu Yong incident might just be the “tip of the iceberg.”
He explained, “Many private entrepreneurs initially made their fortune through real estate or affiliated financial platforms, leaving behind a multitude of compliance risks. Despite transitioning towards ‘nationally encouraged sectors’ like new energy, AI, and intelligent manufacturing today, regulatory authorities do not relax historical scrutiny just because these are ‘correct paths.'”
Chen Yang elaborated that with current pressure on local finances and high anti-corruption efforts, many controllers have become key targets for inspection. He stated, “Previously it was ‘fishing in distant waters’ (overseas investigation), but now it has turned into ‘fishing in nearby waters’—targeting local entrepreneurs who have resources and previously collaborated closely with officials. These individuals may not only be the starting point but also the end point of problematic chains.”
The Lu Yong incident rapidly became a trending topic on social media platforms, with multiple related topics subsequently being censored. Nonetheless, platforms like Snowball, Zhihu, and Maimai still host a plethora of comments. Some users humorously commented, “The detention notice arrived before the annual report.” Others sarcastically remarked on the name of Lu Yong’s shareholding enterprise, Banbutang, stating, “Not even a step in, straight into the discipline inspection commission hall.”
Some investors expressed concerns, with one individual commenting on an online forum, “Spending over 600 million to acquire within a year, and at the first sign of an investigation, who would dare invest in private enterprises? Neither state-owned enterprises nor private ones seem safe; how can the market continue to function?”
Numerous figures in the business community believe that if the “detention spree” continues spreading, it could severely dent the already beleaguered confidence in the private economy over the long term.