Enrons of China; Scoops: They reveal a business culture that is now teetering on the brink between cronyism and capitalism.

Byline: Hu Shuli (Hu is the editor of Caijing magazine, a leading business publication.)

Feng Mingchang seemed a wonderful success story, and he had his government to thank. The party secretary of Nanhai city accompanied Feng, a former fish dealer in southern China, the first time he went to a state-owned bank to apply for a large loan. With the official's help, Feng received the yuan equivalent of a $60 million credit line, the largest any private firm in the province had ever received. Within five years Feng had obtained $890 million from the largest bank in China. He became a star in his hometown, owning what locals said was the biggest manufacturer of decorative wooden boards in Asia, Huaguang Decorative Boards Co. Ltd.

Then the rotten floor fell out. The central government began investigating charges that Feng had colluded with local government officials to fraudulently obtain billions in loans from state banks. Feng's multibillion-yuan business empire imploded virtually overnight. He is now in jail. Several high-ranking local officials and state bankers arrested along with him are awaiting trial. This is China's worst known case of crony capitalism, and it offers some interesting perspectives on the state of corporate leadership.

Perhaps the most hopeful sign is that the story of Feng Mingchang became known at all. It was first exposed in Caijing magazine (which I edit) in 2003, which shows that the government is now allowing media to play their proper role as a watchdog. A milestone was passed in August 2001, when a Caijing cover story revealed how Yinguangxia--a conglomerate that got most of its revenue from vegetable-extract exports and was then the second largest company on China's stock market--had faked $85 million in profits. The authorities suspended trading of the company's stock and launched the first investigation ever triggered by a media expose. The executives were sentenced to jail terms ranging from two to three years. The Yinguangxia scandal was so infamous that when the Enron case broke, the Chinese media called it the "American Yinguangxia."

The full story is not all dirt. Business leadership in China is evolving as fast as the country's rapidly growing economy. China now has about 160,000 state-owned enterprises, which contribute roughly one third of its GDP, and the private sector has accounted for ...