Now This Is Bad Publicity

For more than two decades, movie star Liu Xiao- qing has held the nation spellbound with her Madonna-like ability to reinvent herself and stay on the cutting edge of China’s stunning social transformations.

Whether it was playing a fresh-faced heroine of the Communist revolution, or becoming a best-selling author, business tycoon and self-proclaimed richest woman in China, she reveled in the role of trailblazer.

This summer, the 51-year-old actress may have landed a new role--that of the country’s most famous tax dodger--and she landed in jail.

The Chinese call it “killing the chicken to scare the monkey.” And if authorities were looking for a high-profile deterrent to tax evasion among China’s new rich, they couldn’t have picked a better person.

Within weeks of her arrest in June, at least half a dozen books about her life hit the shelves. Newspapers and magazines around the country jumped on the unfolding drama. Fans and foes alike clogged Internet chat rooms debating the significance of the “Liu Xiaoqing phenomenon.”

“She shouldn’t have identified herself as a ‘billionaire,’ ” Cao Xing, a former lawyer, said in one of the new books, “The Tragic Movie Queen.” “Ten billionaires cannot measure up to one acclaim as ‘the people’s artist.’ ”

Frightened fledgling capitalists, from entrepreneurs to entertainers, saw the writing on the wall and raced to pay their taxes. Overall tax revenue in the first eight months of the year shot up 11% compared with last year, state media reported. Of that, personal income revenue soared 24%.

If Liu had anything to do with this new level of awareness, it’s testimony once again to her uncanny ability to stay relevant--for good and for bad.

Unlike in the West, paying taxes in China is still a novel concept. According to the State Administration of Taxation, personal income tax last year accounted for only 6.6% of China’s overall tax revenue, many times below the norm in more developed countries. The bulk of the tax revenue comes from industries and businesses, both public and private.

Until recently, most Chinese were simply too poor. The threshold is income of about $100 a month, which still exempts the majority of Chinese. Even relatively well-off urbanites only make on average about $65 a month. Those wealthy enough to pay speak of a system full of loopholes and lax enforcement.

But a growing gap between China’s rich and poor is fast becoming a potential cause for social instability. Early this summer, Chinese Premier Zhu Rongji decided he’d had enough and ordered a crackdown against the country’s biggest tax cheats.

The scofflaws are legion: Of the 50 richest Chinese picked by Forbes magazine last year, only four had apparently paid any income tax. Two years ago, Forbes ranked Liu as China’s 45th-wealthiest person, with assets of about $70 million.

Today she sits in a Beijing detention center for allegedly dodging $1.2 million in taxes. No trial date has been set pending the outcome of an ongoing investigation, her lawyer Yao Yanqian said. If convicted, she could face a maximum of seven years in prison.

‘Tragic’ Scapegoat

While few Chinese support breaking the law, there’s a general consensus that Liu makes an easy scapegoat. Two businessmen whom Forbes ranked China’s 2nd and 3rd richest reportedly are also under investigation for tax evasion, but most Chinese wouldn’t recognize their names.

“Lots of people have gotten away with much more,” said Chen Zihan, an editor of “The Tragic Movie Queen.” “Her problem was she dared to flaunt her wealth and go against the grain of Chinese culture.”

Whatever her crime, Liu’s plight resonates with her generation. They shared the same deprivations and longed to make the great leap forward when the late “paramount leader” Deng Xiaoping said “to get rich is glorious.”

Her twisting fortunes also mirror China’s journey from a nation of the proletariat to a nation increasingly driven by the pursuit of wealth.

The daughter of undercover workers for the Communist revolution, Liu got her first break in 1979 when she was cast as a young guerrilla leader who risked her life to save a wounded Communist soldier. Her co-star in “Xiaohua,” or “Little Flower,” was Joan Chen. The award-winning movie made the two unknown actresses instant stars in China.

While Chen chose to leave and go to Hollywood, Liu stayed in the motherland and rode the wave of economic reforms.

“In the late ‘70s, China’s art scene was practically nonexistent,” said Wang Jianzhong, one of Liu’s former business partners. “There were very few TV channels, and new movies were rarely made. It was relatively easy to become famous. Today it’s quite possible that someone tells me they’ve been in 40 movies and TV dramas and I’ve never even heard of them.”

China was changing fast. Liu quickly came to feel that fame without fortune was no longer enough.

As a fledgling actress in Beijing, she made only $6 a month. It was barely enough to buy food. Pretty clothes were the stuff of dreams.

Shame became an incredible motivating force. She never forgot the moment when fans in Hong Kong asked her for an autograph while she was rummaging through the discount basket at a cheap street stall.

Obsessed With Money

Her first taste of riches came when someone offered her $400 to sing on a celebrity tour. She had never seen so much money in her life. The night she got paid, she counted the wrinkled bills and dirty coins, again and again, until the sun came up and her fingers had turned black.

She saw how fame could be parlayed into cash, and she couldn’t help wanting more. Eventually, she used her money to make even more in real estate, cosmetics, food, advertising and film production.

“Her obsession with making money was a national obsession,” said Hao Jian, a film critic at the Beijing Film Academy. “The Chinese people were terrified of ever being poor and hungry again.”

But unlike most Chinese who shun attention, Liu thrived on public scrutiny, even negative publicity.

In the early ‘80s, she shocked the country by publishing the first of several memoirs. It was something even veteran Chinese artists didn’t dare do at the time.

“It was revolutionary, especially for a woman,” Hao said. “China had just emerged from the Cultural Revolution, a period of total suppression against individual expression and personal freedom. Yet she dared to talk about herself, dared to live the way she wanted to live.”

In the book, she bragged about pulling herself up by her bootstraps and complained famously: “It’s hard to be a human being. It’s harder to be a woman. It’s even harder to be a famous woman.”

The book instantly drew attacks. How dare she imply it’s hard to be alive when she lives in a socialist country? But the controversy transformed her from mere actress into cultural icon. Her book was serialized in newspapers and spawned a whole genre of celebrity tell-all literature in China.

Legal Woes and Foes

For those who despised her greed, it was inevitable that the money that lifted her up would also bring her down. In recent years, she became better known for her various legal troubles than business and acting successes.

A burgeoning gossip industry couldn’t get enough of the courtroom intrigues--how she sued her second husband for divorce, how she sued a reporter for defaming her, how a real estate company sued her for defamation, how a client sued her firm for failure to deliver paid merchandise.

“Tax evasion is only the tip of the iceberg,” said Wang, the former business partner, who later sued her and wrote a book about their falling out. “She doesn’t know how to be a decent human being. So it’s no surprise she ended up the way she did.”

But Liu seemed oblivious to what was happening and continued to be scandalous.

At a time when going to court and getting a divorce were still rare, she offered juicy details about outsize business deals and an outrageous private life: not one but two divorces, no desire for children and a hearty appetite for boyfriends, some of them many years her junior.

“Each case elevated her stature,” author Lu Ye wrote in the book “Investigating Liu Xiaoqing.”

“People who hate her are forced to confront her again. People who forgot her now remembered her. People who like her respected her more. The few who don’t know who she is now do. Not only did the lawsuits fail to defeat her, they made her more popular. You can’t help but admire her for that.”

Then even her biggest fans began to question her judgment.

According to various media accounts, she tore down rural homes to make way for a movie set and abandoned the project without compensating the farmers. She talked investors into paying for a new TV series but gave them no credit when it was done. According to Wang, the business associate who sued her, she rarely paid for anything and was fond of walking into a store and simply saying, “I like it.”

Perhaps to show off, perhaps to save production costs, she began casting herself as multiple characters in a single production. Aging from a 20-year-old maiden to a silver-haired empress, she loved playing the part of ancient female rulers.

Even in prison, she continues to shock by refusing to bow her head in remorse and instead dictates the terms of her incarceration. It’s been widely reported that Liu boasted about enjoying three things in jail: studying English, exercising and reading, unlikely activities for a Communist prison inmate.

“She’s her own worst enemy,” said Stanley Rosen, an expert in Chinese film at USC. “She should be more humble. But she’s basically saying, ‘I’m Liu Xiaoqing and you’re not.’ ”