The Mystery of Famous Blogger "Chan Zhong Shuo Chan": Suspected to Be Yi'an Technology Operator Li Biao

March 14, 2009, 11:27 Oriental Morning Post
Oriental Morning Post — Financial Weekly reporter / Lin Qi

The self-proclaimed "World's No. 1 Blogger," Chan Zhong Shuo Chan, died of nasopharyngeal cancer on October 31, 2008. His other identity was Muzi, columnist for Fund Analysis magazine. Reportedly, he was not yet 40 at the time of his death.

Additionally, Chan Zhong Shuo Chan may also have been Li Biao, the infamous operator behind Yi'an Technology.

Stocks cycle through life and death, and Chan Zhong Shuo Chan's legendary life was no different.

Chan Zhong Shuo Chan miraculously predicted the global financial crisis triggered by the US subprime mortgage crisis in 2007, and accurately predicted the tops and bottoms of both US and Chinese stock markets. He left his extraordinary prescience to the world. Every day, tens of thousands of people study his theories and his thinking.

Though he has departed, he left behind a great deal. On his blog, he left 1,134 brilliant articles and profound ideas, including the "Teaching You to Trade Stocks" series and the "Detailed Commentary on The Analects" series.

His final blog post on October 10, 2008 contained just one sentence: "Keep reading the charts, short-term sprinting. The US breaking below 10,000 was indeed spectacular as expected. What happens around October 19? We'll see. Greetings in passing." Yet as of 8:44 PM on March 13, 2009, his blog had received 39,806,364 visits.

Li Biao, Chan Zhong Shuo Chan — are they the same person? Financial Weekly launched an investigation, gradually approaching the truth.

Intimately Familiar with the "Limit-Down Washout Method"

The Yi'an Technology case from 10 years ago shook the entire market. Yi'an Technology was the first Chinese stock to break through 100 yuan per share, and also the first to fall by 100 yuan. It wove many myths of sudden riches, yet was a nightmare for far more retail investors.

According to court findings, between October 1998 and February 2001, Luo Cheng, chairman of Yi'an Group (Holdings) Ltd., entrusted Guangdong Jinyi Advisory Co., Ltd. to manage funds, employing Li Biao, Tang Fan, Guo Qing and others as operators to manipulate Yi'an Technology's stock price.

Media reports at the time revealed that the hidden hands actually manipulating Yi'an Technology were Zheng Wei and Li Biao. Later, the two parted ways over disputes about profit distribution.

Li Biao was extremely clever, but when operating, he was like a fiend wielding a butcher's knife — ruthless to the extreme. As is widely known, Li Biao invented the "limit-down washout method." Chan Zhong Shuo Chan described his process of operating a stock using precisely this method. From his description, it is clear that the stock was Yi'an Technology.

In October 1998, Yi'an Technology had been range-bound, making constant false breakouts. Technically-minded retail investors who chased each breakout were repeatedly trapped. The stock would rise one day and fall the next, moving like a drunken boxer, leaving investors dizzy and confused. In hindsight, it was simply sideways movement.

"First, at a major resistance level, I held the line and absorbed all the shares from trapped sellers wanting out... Then I kept making false breakouts at that level... And through repeated false breakouts, every technical trader handed over their chips," recalled Chan Zhong Shuo Chan.

Chan Zhong Shuo Chan continued: "At this point, basically all the money in the accounts had been spent... At the time, there was a type of intraday margin that required same-day settlement. Using the remaining funds, I borrowed this type of margin. Then that day I bought ferociously — by morning, all the cash plus margin was fully invested. In the afternoon, the position had to be closed. Repeated negotiations about whether closing could be avoided — the answer was no. With great apparent anguish, I began the closing operation. Like a waterfall, the price plunged. Everything bought in the morning was dumped at a loss. The price crashed through the previously held platform. After the close, rumors immediately spread everywhere about someone being trapped and facing margin calls. The next day, all the 'rat nests' — everyone who knew the inside story — stampeded for the exit, and the third day was the same."

What Chan Zhong Shuo Chan described in his blog was precisely the harrowing scene of Yi'an Technology on December 16, 1998.

On December 16, 1998, a sudden rumor emerged that Yi'an Technology's market maker had been forcibly liquidated due to excessive margin usage. The stock fell 4.88% that day, 7.56% the next day, and hit the limit-down on the third day.

The devastatingly heavy selling made everyone believe the rumor was true — the market maker's capital chain had indeed snapped and positions were being forcibly closed. Nearly every investor regretted not having fled earlier, but with the stock locked at limit-down, there was no escape. Anyone watching the screen was seized by panic, desperate to flee.

On the fourth day, the stock still opened sharply lower, but the limit-down was broken. Everyone rushed to escape. Despite the massive selling pressure, the price mysteriously stopped falling — which was interpreted as the market maker supporting the price to distribute remaining shares.

"At that moment, from N remote locations far away, all the selling was being absorbed into an anonymous pocket. Everyone who'd escaped was congratulating themselves, because on the fourth day the stock still opened with a large gap down. Suddenly, powerful buying surged up like magma erupting from underground, sweeping clean every share offered for sale. Before anyone could react, they had no opportunity left to buy. The next day, the same thing — as soon as the market opened, it instantly removed any possibility of buying, while those who hadn't escaped in time were still selling," Chan Zhong Shuo Chan recalled.

The consecutive breakdowns were universally interpreted as a market maker's final distribution phase. But Chan Zhong Shuo Chan did the opposite — using rumors and technical breakdowns to create panic while aggressively accumulating shares. His brilliance and ruthlessness were on full display. This technique was later dubbed the "limit-down washout method" and became widely known.

As he described, the following day Yi'an Technology inexplicably hit the limit-up. Then came four consecutive bullish days, but then the stock began consolidating at a level slightly below the previous platform, unable to break through. Once again, investors were baffled.

On January 18, 1999, Yi'an Technology suddenly hit the limit-up, blasting through both previous platforms. The breakout took less than 15 minutes.

After the "boy who cried wolf" story had been told too many times, when Yi'an Technology actually broke out, no one dared to chase it. The stock simply never looked back. From the daily time-sharing charts at the time, the price frequently climbed at a steady 45-degree angle, typically closing at or near the intraday high.

Zhong Lin, Chairman of Shanghai Qilin Shangshan Asset Management Co., Ltd., told the reporter: "At the time, someone said Yi'an Technology's operator had pushed it so high they'd never be able to distribute. I said distribution was simple — just keep the listed company's image intact, maintain positive market sentiment, then let the stock drop 50% and play the bounce, and they'd definitely get out. Before I'd even finished speaking, the stock dropped to over 70 yuan, then bounced. Retail investors saw it as oversold, and around 88 yuan a friend's father bought in — and indeed it just kept falling afterward, trapping everyone."

Also Felt Guilty Toward His Brother

At the time when Li Biao was operating Yi'an Technology, his younger brother Li Bin was implicated.

According to Guangdong's Information Times, the "hidden boss" behind four investment advisory companies — Guangdong Xinsheng, Zhongbai, Baiyuan, and Jinyi — which received penalties from the CSRC in April 2001, was a Beijing man named Zheng Wei, said to be extremely well-connected.

Zheng Wei's company was registered in Beijing, making it inconvenient to open accounts and raise funds in Guangzhou. So Zheng Wei took control of Guangdong Jinyi Investment Advisory Co., Ltd.

The legal representative of Jinyi was named Li Bin, but he knew nothing about stocks, had never appeared in person — the actual controller of the company was his elder brother, "a certain Mr. Li." The court had already disclosed that it was Li Biao who partnered with Zheng Wei and was specifically responsible for trading operations.

Initially, Li Biao probably never imagined that when the scheme unraveled, his innocent brother would be dragged in and suffer greatly. Coincidentally, Chan Zhong Shuo Chan also frequently expressed in his blog posts a sense of guilt toward his brother. His brother was never able to forgive Li Biao, and this unresolved knot tormented him deeply.

When collaborating with Zheng Wei, Zheng Wei oversaw the big picture and was mainly responsible for fundraising and making major trading decisions, while Li Biao handled the specific planning and execution.

In April 1999, Zheng Wei and Li Biao parted ways due to conflict over interests. By then, Yi'an's takeover of Shenzhen Jinxing was a foregone conclusion, and a substantial number of shares had been accumulated. To continue manipulating Yi'an stock, Zheng Wei made adjustments, registering Xinsheng, Zhongbai, and Baiyuan in April, August, and September 1999 respectively. Li Biao, after receiving his share of stocks and cash, transferred the Yi'an shares held in the Jinyi company to Xinsheng.

Though they had parted ways, Li Biao received a portion of stocks and cash. He could continue trading Yi'an Technology stock. This aligns perfectly with Chan Zhong Shuo Chan's account of his own Yi'an Technology trading methods.

From "Math Girl" to Chan Zhong Shuo Chan

In recent years, Chan Zhong Shuo Chan had been very active online. The ID "Girl Who Loves Math" was once hugely famous on Tianya forums, nicknamed "Math Girl."

"Math Girl" wrote in a brash, sharp-tongued style with eye-catching headlines, and quickly turned the Tianya forums upside down.

Later, he opened a blog on Sina under the name "Chan Zhong Shuo Chan." The writing style changed considerably, less abrasive than "Math Girl," but the writing still grabbed attention.

Ever since Chan Zhong Shuo Chan began blogging, netizens had consistently suspected he was Li Biao.

Chan Zhong Shuo Chan Is Muzi

Chan Zhong Shuo Chan, Li Biao, Muzi — are they all the same person? Loyal followers were determined to get to the bottom of it. Financial Weekly investigated in parallel.

Chan Zhong Shuo Chan had expressed his intention to start a publication. Not long after, Qingdao Muzi Venture Capital Company co-founded Fund Analysis and New Finance & Economics. And Li Biao was the chairman of Qingdao Muzi Venture Capital.

After Fund Analysis launched, its senior advisor Muzi frequently wrote columns under "Muzi's Viewpoint." The reporter discovered that all these articles originated from Chan Zhong Shuo Chan's blog, with only minor textual modifications for magazine publication.

Chan Zhong Shuo Chan had even miraculously predicted years in advance that the US subprime crisis would trigger a global financial crisis in the second half of 2007, on a scale comparable to the 1929 world financial crisis. In 2005, he miraculously predicted the stock market bottom and that a magnificent bull market was imminent. In 2007, he miraculously predicted the market top, even specifying the exact level — 6124.04 points.

Due to his repeated, miraculously successful public predictions, he amassed an enormous online following. His fans were called "Chan fans," and they called him "Chan Master."

Last year, when the "Chan Master" revealed he had nasopharyngeal cancer, his devoted followers launched an investigation to uncover his true identity.

Only recently, when Fund Analysis published an obituary, was the mystery solved: Chan Zhong Shuo Chan was indeed Muzi.

Fund Analysis stated on November 17, 2008: On the morning of October 31, our Special Senior Advisor Muzi passed away. Knowing Muzi began with the founding of Fund Analysis. He was a very low-key person. He wrote over 30 high-quality column articles under "Muzi's Viewpoint" for Fund Analysis — sharp in his writing, unambiguous in his positions. Whether in macro judgment or technical analysis, his pieces were well-reasoned, accessible, and beloved by readers.

His blog "Chan Zhong Shuo Chan" published 1,134 blog posts in total, classified as: Chan Zhong Shuo Chan (83), Poetry & Verse (95), Music & Art (67), Literature, History & Philosophy (Detailed Commentary on "The Analects") (114), Political Economy (561), Science, Mathematics & Technology (15), Vernacular Essays (106), Pop Culture & Entertainment (36), etc. His articles covered an extraordinarily broad range, his knowledge system was vast and complex, and he had a devoted readership.

This confirmed that Muzi was Chan Zhong Shuo Chan.

Chan Zhong Shuo Chan and Li Biao — Like Shadow and Form

Financial Weekly's investigation revealed that the phone number listed for Fund Analysis online was disconnected.

One Chan fan claimed to have gotten through to Fund Analysis, but the editor on the other end refused to reveal any information about Muzi.

The reporter called Ba Shusong, Vice Director of the Financial Research Institute at the State Council's Development Research Center, who had been involved in co-founding Fund Analysis, but he maintained silence.

By this point, Chan fans still refused to believe that Chan Zhong Shuo Chan was Li Biao, and were even less willing to accept that he had passed away. So the investigation continued.

On November 12, 2007, Chan Zhong Shuo Chan wrote on his blog that he would be traveling. "This ID has to go on a business trip, flying out tonight."

Later, Li Biao's Qingdao Muzi Venture Capital indeed jointly established the Pingxiang Innovation Capital Venture Investment Co., Ltd. with Shenzhen Innovation Investment Group (Shenchuangtou).

The timing and events were strikingly consistent once again. In fact, the current chairman of Shenchuangtou, Jin Haitao, was the former president of Yi'an Group — his relationship with Li Biao was extraordinary.

After Li Biao and Jin Haitao signed the agreement, on November 14, 2007, an inauguration ceremony and investment forum for Pingxiang Innovation Capital was held at the Seven Star International Business Hotel in Pingxiang. The hotel's website read: "On November 13, we received notification from the Pingxiang Municipal Economic and Trade Commission that the inauguration ceremony for Pingxiang Innovation Capital Venture Investment Co., Ltd. and Pingxiang Innovation Capital Management Co., Ltd., along with the Innovation Capital Investment Forum, will be grandly held at Seven Star International Business Hotel on November 14. Key delegation members include: Ms. Zeng Qinghong, Deputy Secretary and Mayor of Pingxiang; Mr. Li Jinlin, Chairman of Pingxiang Innovation Capital Venture Investment Co., Ltd.; Mr. Jin Haitao, Chairman of Shenzhen Innovation Investment Group Co., Ltd.; Mr. Li Biao of Qingdao Muzi Venture Capital Center, and others."

The same information appeared on the local government website, and local newspapers also covered this partnership.

On November 15, 2007 — the day after Li Biao signed the agreement — Chan Zhong Shuo Chan wrote in his article: "As soon as the market closed today, I was dragged off to inspect a company. The Party Secretary came out personally — what can you do?"

Chan Zhong Shuo Chan's movements and timing showed a high degree of consistency with Li Biao's movements and timing. Chan Zhong Shuo Chan stated multiple times on his blog that aside from stock trading, his main work was in venture capital, requiring frequent site visits to evaluate projects.

Financial Weekly reporters contacted multiple prominent figures in the venture capital community. All who knew Li Biao chose silence.

After Chan Zhong Shuo Chan became seriously ill, his last article was posted on October 10, 2008. There were no further updates. Many people claiming to be Li Biao's classmates left messages on the blog reminiscing about Li Biao, and others wrote memorial articles on their own blogs.

Extensive Connections

The reporter discovered that Fund Analysis listed Zhou Daojiong, the second chairman of the CSRC, as honorary publisher, and Ba Shusong from the State Council's Development Research Center Financial Research Institute as chairman of the expert committee.

At the 4th "China Business Management Summit" hosted by the China Institute in America, attended by US Treasury Secretary Paulson and Labor Secretary Elaine Chao, Qingdao Muzi was promoted as China's first limited partnership enterprise strictly established according to international conventions and market-oriented operations, receiving formal commitments from Wall Street professionals wishing to become limited partners.

Though we cannot definitively state that Chan Zhong Shuo Chan was Li Biao, we believe that as Chan fans continue their investigation, the truth will gradually surface.