N. Korea’s Designee Under House Arrest

A Chinese tycoon picked by North Korea to spearhead an experiment in capitalist reform is under house arrest for possible economic misdeeds in his native country, the government said Tuesday.

Addressing the issue for the first time since reports of his detention surfaced late last week, Chinese authorities confirmed that Yang Bin’s movements were being restricted by police. Yang, 39, has not been heard from since Friday, when authorities descended on his home in Shenyang in northern China and hustled him away.

“The public security organs in China have, according to law, put him under house supervision,” said Zhang Qiyue, a spokeswoman for the Chinese Foreign Ministry. “Yang Bin and his enterprises in China are suspected of being involved in various illegal activities in China.” She did not elaborate.

Yang, head of Euro-Asia Agricultural Holdings Co., has acknowledged owing $1.2 million in taxes but said before his detention that he was about to settle the matter.

Yang, an orchid exporter who is one of China’s richest men, has been making headlines with his appointment by North Korea to head a new specially designated economic zone in the city of Sinuiju, on the border with China. North Korean leader Kim Jong Il shocked observers last month by announcing that the enclave would enjoy total freedom to pursue a free-market policy, which his hermetic, Stalinist state has long resisted. Kim then tapped Yang, a foreigner, to lead the reform experiment.

No one appeared more surprised than the Chinese government, which seemed unprepared for the announcement even though China and North Korea are close allies. Since then, China’s leaders have pursed their lips and stated their support for reform in North Korea but have maintained a stony silence about Yang’s appointment.

Yang’s business dealings were already under investigation in China when the government in Pyongyang, North Korea’s capital, swore him in Sept. 24 as Sinuiju’s leader. His sudden detention Friday might have been in the works for some time, observers say, but its timing amplified Beijing’s displeasure with Pyongyang.

The government denied any connection.

“Yang Bin’s case has nothing to do with the establishment of the special area of Sinuiju,” Zhang told reporters.

However, the Yonhap News Agency of South Korea reported over the weekend that China was sending a senior official to North Korea this week to try to keep the rift between the Communist allies from widening.

Also, North Korea’s vice president is scheduled to visit China next week.

The investigation into Yang’s dealings comes at a sensitive time politically for China’s leaders, who are gearing up for an important Communist Party conclave next month that could bring in a new generation of top officials.

The Beijing regime is acutely aware of simmering dissatisfaction among ordinary people over corruption and the vastly uneven distribution of wealth. Residents assume that the newly rich are the beneficiaries of ill-gotten gains, and in many cases they are right.

To be seen as combating the problem, the government has launched a high-profile crackdown on tax cheats, a campaign that has so far netted one of China’s best-known celebrities, movie star Liu Xiaoqing.