Long-awaited lawsuit against tobacco giant opens

The long-awaited case of Chinese billionaire Chen Fashu suing a tobacco giant over the trade of millions of pharmaceutical shares opened in Yunnan High People's Court on Thursday.

Chen Fashu, chairman of Fujian-based Newhuadu Industrial Group and the province's richest man, bought 65.81 million shares of China's top pharmaceutical company Yunnan Baiyao Group in 2009.

Chen bought the shares for 2.2 billion yuan ($322.3 million) from Hongta Group, the country's largest tobacco producer. After the deal, Chen became the second-largest shareholder of Yunnan Baiyao.

But after two years’waiting, Hongta Group's supervisor, China Tobacco, vetoed the deal in January for "preventing the loss of State-owned assets".

The lawsuit questions whether China Tobacco has the authority to approve the deal and how to define "the loss of State-owned assets".

Li Qing, Chen's attorney, said the Ministry of Finance, not China Tobacco, has the authority to examine and approve the deal.

"The defendant claimed the deal 'a loss of State-owned assets' because the prices of the traded shares went up after the deal. But what if the prices went down?” Li said.

Based on Thursday's closing price, the shares Chen bought is worth more than 5.4 billion yuan.