- Associated Press - Sunday, June 26, 2016

HOUSTON (AP) - Businessman Jude Shao spent a decade in a Chinese prison, uncertain when he’d be let go, and then was barred from leaving Shanghai for five more years.

“We were a high-profile American company selling the Chinese products, and we attracted government attention,” he says by way of explanation.

Shao, Shanghai-born but a U.S. citizen at the time of his arrest, was not allowed to return to this country until 2013. Today, the Stanford Graduate School of Business alumnus is in Houston, where he founded Sky Blue Butane, the only American company to manufacture butane fuel canisters.

Success in the Texas venture would bring both personal and professional satisfaction for Shao.

“If I prove myself successful in business, prove myself ethical in business, I prove they were wrong,” he told the Houston Chronicle (https://bit.ly/28Rxwmd) recently at the company headquarters in an industrial area near Hobby Airport.

Shao, 54, came to the United States in 1986 to study educational technology at Rhode Island College. He later earned a master’s degree at Stanford and began splitting his time between San Francisco and Shanghai, where he ran a company exporting U.S. medical imaging equipment to China. He became a naturalized U.S. citizen in 1997.

He was among the first class of expatriates to try their hand at business in China, as the country’s economy began to take off after years of strict central control. His business grew quickly until Shanghai officials came knocking at his door. Shao told tax auditors they could see the books, but after that he locked the door and refused to cooperate or pay a $50,000 bribe, he says.

His refusal, he says, landed him in more trouble with the authorities. They accused him of tax evasion and detained him at the Shanghai airport when he arrived on a flight from the United States.

Shao’s staff called the U.S. Consulate when he didn’t show up to work.

“Because I’m not white, I’m Chinese just like them, they didn’t know they were holding an American citizen,” Shao said. “By that time it was too late. They were playing hardball.”

For more than two years, Shao was held incommunicado. Eventually, he was convicted during a trial for which he couldn’t prepare any defense and moved to a prison Shanghai uses for foreigners, which is separate from and nicer than the prisons for native-born Chinese inmates. There, he was able to communicate with the U.S. Consulate once a month and with his family still living in Shanghai.

His 1993 Stanford classmates began to advocate for him from the United States, completing a full Chinese audit of his company to prove the charges were meritless. Shao’s case grabbed the attention of the Wall Street Journal. The State Department would occasionally tell reporters they were getting close to freeing Shao.

But every time the two countries seemed close to a deal, a setback in U.S.-China relations would stall the process. In 2001, a U.S. spy plane collided with a Chinese fighter jet, sparking an international dispute. In 2006, President George W. Bush refused to hold a state dinner for Chinese President Hu Jintao.

“I became a political chip,” Shao said.

Shao was finally released weeks before the 2008 Olympics began, on the condition that he would stay in Shanghai for another five years and not talk to reporters about his case. Officially, he was charged with tax evasion and sentenced to 16 years in prison.

“His was one of the first really high-profile cases of a naturalized U.S. citizen of Chinese descent going back to the mainland, doing business and being detained and prosecuted,” said Sophie Richardson, China director for Human Rights Watch. “It was a surprise to the U.S. business community.

“The general expectation at that time was that expatriate businesspeople would be immune from the same kinds of questionable prosecutions and investigations that were rampant across the mainland. His was one of the first cases to show it didn’t matter what passport you had, you could still be quite vulnerable.”

Shao’s decade behind bars left him more determined than ever to succeed in business. After spending some time readjusting to American life, he began working as security analyst in Washington, D.C., where he researched Chinese manufacturing companies and monitored trends in the U.S. oil market.

Around that time, Shao’s friends held a dinner to welcome him back to the U.S. The meal was a traditional Chinese hot pot, whose preparation requires the use of a canister. In the midst of his work researching Chinese manufacturing, Shao noticed that the canister was made in Korea.

“That clicked,” Shao said. “Why are we importing Korean butane gas canisters when American oil prices are going to go down?”

As soon as oil prices slipped, Shao took action. He ran a feasibility study and set up a 14,000-square-foot factory in southeast Houston in April 2014. His Stanford classmates invested in the business.

Today, the factory employs seven workers on the butane canister line. Many of their products are made for Coleman, the camping company. They are sold across the U.S. and as close by as the local Target and Wal-Mart. Some are exported to Canada.

The pitch to buyers is simply that it costs less to produce the fuel canisters in the U.S., especially in Houston. Domestic regulations surrounding production of butane fuel canisters are more stringent than in other countries, leading to a higher quality product, Shao says. The company sources its butane gas from domestic suppliers.

Sky Blue Butane isn’t aiming to take over the global butane canister market, which is dominated by three Korean companies, but to supply the relatively modest North American market. Of 500 million cans of butane gas consumed annually worldwide, the U.S. accounts for 20 million.

Right now, the plant is producing 3.6 million cans of butane gas a year, or nearly 20 percent of the U.S. market. Sky Blue Butane is planning to open a second factory in Houston within the next year.

Shao’s eagerness to dive back into business after so much hardship motivates other Houston entrepreneurs.

“For the Asian community, it’s inspiring,” said Linda Toyota, president of Houston’s Asian Chamber of Commerce.

Shao runs the business with help from Blake Turner, a recent Rice University graduate who serves as his chief operating officer. Turner appreciates the opportunity to help build a unique U.S. company.

“It’s very rare to get the chance to help build an American manufacturing business in this day and age,” he said.

For Shao, Sky Blue Butane is a way to succeed in a niche American market, and to show that his years behind bars didn’t dull his business sense.

“I want to prove my business acumen is still there,” Shao said. “We’re on track. If I prove the concept is right, that’s my goal.”

___

Information from: Houston Chronicle, https://www.houstonchronicle.com

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