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China's powerful trade ministry helped hoodwink Canada into allowing a group of Chinese police agents into the country under the guise of doing business here, according to evidence presented at the refugee hearing for fugitive Lai Changxing.

Susan Gregson, head of the immigration section at Canada's embassy in Beijing, testified yesterday that the application for visitor visas from the bogus business delegation was endorsed by China's Minstry of Trade and Economic Co-operation (MOFTEC).

Canadian visa officials were told that members of the group worked for the China National Pulp and Paper Corp. and wanted to visit Canada to discuss "Chinese users' requirements for Canadian pulp and paper."

In fact, unbeknownst to embassy staff, the delegation actually consisted of three secret police investigators and Mr. Lai's older brother, Lai Shuiqiang, who wanted to persuade Mr. Lai to return from Vancouver to China to face major smuggling and bribery charges.

Letters inviting the reputed businessmen to Canada were sent by two government-owned Chinese firms operating in Vancouver. These two firms were Tricell (Canada) Ltd. and Top Glory Ent. (Canada) Ltd.

Ms. Gregson, who testified over the telephone from Beijing, said she learned only much later about the true nature of the delegation's visit.

Computer notes produced at yesterday's hearing indicate that the group's application for visitor visas to Canada was accompanied by a "recommendation for express service from MOFTEC."

MOFTEC is one of the most powerful ministries in the Chinese government, responsible for such vital areas as negotiating China's entry into the World Trade Organization.

There was no word yesterday on whether Canada has protested against the abuse of its visa procedures by Chinese authorities.

Ms. Gregson hinted that the two Vancouver-based Chinese companies that invited the delegation to Canada for business purposes could face repercussions.

"If they misrepresented themselves, that certainly speaks to their credibility for future [visa]applications," Ms. Gregson said.

A hearing document shows that Tricell (Canada) president Victor Wu wrote May 15, 2000, to Lai Shuiqiang, the fugitive Mr. Lai's older brother, officially inviting him to Canada to discuss pulp and paper.

Yesterday, Mr. Wu told The Globe and Mail that he does not remember writing the letter to Lai Shuiqiang or anyone else in the delegation.

He said his company, which employs seven people, is owned by the Chinese government and has been operating out of Vancouver for 10 years.

Tricell regularly invites its customers in China to visit B.C. pulp mills.

Earlier evidence has revealed that the police delegation spent three days talking to Mr. Lai at Vancouver hotels in early June last year.

Mr. Lai told his refugee hearing that the undercover agents promised not to arrest his wife, co-accused Tsang Mingna, if he would give himself up.

He said they also wanted evidence against Jia Qinglin, a member of China's governing politburo and currently head of the Communist Party in Beijing, who was a friend of Mr. Lai's during earlier days in the city of Xiamen, where his smuggling operation is alleged to have taken place.

"They wanted me to name many officials and say that I paid them money, so they could arrest them. . . .I refused because I knew it would frame people," Mr. Lai said.

After staying four days in Vancouver, the police and Mr. Lai's oldest brother returned to China. A few days later, Mr. Lai applied for refugee status in Canada.

The smuggling and bribery allegations against Mr. Lai were discussed at the very pinnacle of China's Communist leadership, the refugee hearing was also told.

Mr. Lai testified that a report accusing him of illegal activities, including a death threat against a chief investigator, was initialled and commented upon by China's most powerful leader, president Jiang Zemin, and Hu Jintao, a key politburo member expected to succeed Mr. Jiang next year.

According to Mr. Lai, both leaders noted the specific allegation that Mr. Lai had threatened to kill investigator He Yong and advised Mr. He to proceed with caution.

Mr. Lai testified that the report was completely false.

He said it was merely part of a political vendetta designed to oust high-up Chinese authorities who had befriended him.

Nonetheless, the apparent involvement of China's top leaders in the case leaves no doubt why Mr. Lai has become the country's most wanted man since fleeing to Canada 23 months ago.

It may also explain Canada's unprecedented co-operation with Chinese authorities in seeking to have Mr. Lai returned to China for trial on charges that he smuggled $10-billion worth of consumer goods through the bustling port city of Xiamen by bribing hundreds of Communist officials.

The hearing continues today.