Tang, 48, the youngest of five brothers who set up D'Long in the mid-1980s, was widely seen as the brains behind the sprawling group, whose products range from aircraft to tomato ketchup. Along the way he built a personal fortune Euromoney pegged at US$230 million (HK$1.79 billion) last year.

The arrest comes as state-owned Huarong Asset Management, which Beijing charged with sorting out the failed firm's finances, struggles to figure out which of its myriad assets can be sold to raise cash and which will be retained in a restructured company.

That's no easy task. Mainland sources say the government is unlikely to permit the sale of units in politically sensitive regions. D'Long has extensive operations in the Xinjiang region, home to Muslim and ethnic separatist movements, and in northeast China, where the failure of many state-owned firms has led to high unemployment and worker unrest.

D'Long's growth mirrors that of many Chinese companies that took advantage of ready access to cheap credit from China's state-owned banks to expand without control as the economy took off in the 1990s.

From its beginnings as a photo-processing outfit in Urumchi, D'Long became the world's biggest manufacturer of tomato paste, acquired a dominant role in China's flour industry, and expanded into brokerage and other financial services.

It then set about building an international presence at a time when most mainland firms limited themselves to developing export markets.

In 2000 D'Long bought United States lawnmower firm Murray with US$400 million in financing from GE Capital. It remains unclear whether GE Capital, once seen as a role model by the Tang brothers, has any remaining exposure to D'Long.

That investment quickly soured as Murray tumbled into Chapter 11 bankruptcy, the result of plummeting sales amid consumer complaints about product quality after it transferred its manufacturing operations to China.

Perhaps its best-known move internationally was its rescue last year of Dornier Fairchild, a bankrupt German aircraft maker. Tang and his brothers promised Dornier a billion-dollar investment that never materialised, and the firm is back in reorganisation proceedings again.

D'Long's pretensions to global prominence came to a sudden halt last summer, when China's central bank launched an investigation into a company once involved, directly or indirectly through its many listed subsidiaries, in 40 per cent of all mainland stock market trades.

In September its assets, domestic and foreign, were transferred wholesale to Huarong, a bad-loan clear-up specialist headed by a vice-president of Industrial and Commercial Bank, the country's largest bank and D'Long's biggest creditor.

Sources said Huarong and a team of foreign accountants and lawyers are working flat out trying to untangle the company's labyrinthine finances, including five Shanghai-listed firms - Torch Automobile, Shenyang Hejin and Xinjiang Tunhe Investment, among them - and several dozen unlisted subsidiaries.

D'Long's collapse has wide-ranging ramifications. At one time it employed 100,000 workers, and boasted US$4 billion in annual sales, making it China's biggest taxpayer in each of the past four years.

Now Tang, according to China Business News, is under investigation for criminal violations of corporate and securities laws relating to transactions at D'Long affiliates including Jinxin Credit Trust, Islamic Credit Trust and Hanxin Securities.

elliot.wilson@globalchina.com