China never paid businessman who bought aircraft carrier from Ukraine: Report

BEIJING (AFP) - The Chinese businessman who bought an unfinished Soviet-era vessel that became his country's first aircraft carrier was never paid back the US$120 million (S$160 million) it cost him by Beijing, he was quoted as saying Tuesday.

Entrepreneur Xu Zengping paid Ukraine a US$20 million fee for the Varyag, which was eventually commissioned into the People's Liberation Army (PLA) Navy as the Liaoning, but the price ballooned once towing it to China - a process that was delayed for years - and other costs were included.

A former PLA basketball player, he was chosen to negotiate the acquisition, posing as a businessman who wanted to use it for a floating casino in Macau, and then giving it to the authorities.

But he told Hong Kong's South China Morning Post newspaper: "I still haven't received one fen (one hundredth of a yuan) from our government. I just handed it over to the navy."

After years of refurbishment the ship finally went into service in 2012, a symbolic milestone for China's increasingly muscular military.

The report highlights the close connections between some wealthy magnates and China's military, at a time when Chinese investment overseas is subject to increasing scrutiny.

It said little about the source of Mr Xu's wealth, describing him as "Hong Kong-based" with interests in property and tourism, and said he was motivated by a desire to boost China's military development.

The purchase of the ship was settled by Mr Xu and its Ukrainian owners "over several days of alcohol-soaked negotiations", the newspaper reported.

But he was left relying on friends to lend him tens of millions of dollars to complete the operation, he said, while he said the navy declined to pay on the grounds it "didn't have the budget in the late 1990s because of China's poor economy".

The newspaper quoted an officially published book saying that Mr Xu "bargained with the State Council for years over compensation, but Beijing would pay only the US$20 million auction price", without making clear whether it did so.

The report cited an anonymous source with knowledge of the carrier as saying Mr Xu was saddled with the costs because naval officials who had asked him to take on the mission had either died or were in jail.

He revealed that the ship was fitted with engines at the time it was transported, contrary to some later reports.

Mr Xu said: "I didn't feel real relief until it was formally commissioned by our navy 12 years later. The feeling was like finally seeing my child grow up and marry."