Zhu seethed at what was not printed. The notice said the stalls were a fire hazard. It did not say that the glass-fronted building next door would house a new Silk Alley market, with much higher rents collected by a profit-making venture whose original shareholders included local Communist Party officials. It did not say that the developers of the new building obtained the land from the government at a steep discount.

For more than two decades, as communism gave way to an increasingly freewheeling capitalism in China, Zhu sold clothing in the popular open-air market a few blocks from Tiananmen Square. His trade was an archetype of the entrepreneurial spirit the nation's reforms were supposed to encourage. He had left his state construction job and his government pension to earn his own living.

Now, he was out of business, not by dint of the free market, but by an unchanged feature of China's past - by party leaders who retain control over land and capital, and often use it for personal gain.

``It's totally unfair,'' Zhu said. ``We previously believed the government wanted to help us. We've all been betrayed by these officials.''

From farmers selling vegetables in every town to sales agents touting penthouses in neon-lit urban landscapes, free enterprise has penetrated Chinese life. But the closing of the Silk Alley market, one of the early experiments in modern-day capitalism, shows how winners and losers are still often determined not by supply and demand but by the dictates of party officials.

``It's quite typical,''Capital University of Economics and Business economist Jiang Zezhong said in Beijing. ``The government has the power and investors have the money. They join up and together extract all the benefits.''

Over the years, Zhu expanded into clothing and Silk Alley burgeoned into a Beijing landmark, a teeming assemblage of 400 stalls that was a must-see on every tourist itinerary. Locals bought winter coats and luggage, many of which were counterfeit versions of leading brands. Foreigners snapped up trinkets and silk garments, while changing US dollars on the black market. In more recent years, Silk Alley did a brisk trade in pirated Hollywood movies.

By the mid-1990s, Zhu was bringing home as much as US$600 (HK$4,680) a month. He bought a television set in 1989 and a telephone two years later. He added an air-conditioner and a Volkswagen sedan in 1995. In 1998, he moved into an apartment with a private kitchen and flush toilet.

By then, the Beijing government was talking openly about shutting down the city's open-air markets. China's capital was in the midst of a modernization drive. Butchered pigs hanging from hooks and touts hollering prices were not in keeping with the sleek new image. As Western governments pressured Beijing to crack down on counterfeit goods, open-air markets were obvious targets.

The local government began closing some of them in 1998. Officials told Silk Alley merchants to prepare to go elsewhere. But economists staged conferences and wrote opinion pieces criticizing the plan as unfair to merchants. Silk Alley lived on.

``These people live on their sales,'' Jiang said. ``If you close the market, you have killed their jobs.''

But the pressure remained, in part because Silk Alley was on prime real estate in the center of the city and developers lobbied the government to clear it.

In October 2002, Jiang saw a document declaring that the Chaoyang district government had submitted an application to the Beijing Municipal Commission of Urban Planning seeking permission to replace the market with a new building.

``In China, if there's a formal document, that means it's already a done deal,'' he said.

The first public sign came on July 29, 2003, with a notice tacked outside Silk Alley. A developer named Xinya announced it would soon tear down adjacent houses, while leaving it unclear whether its work would affect the market.

Zhu and several other merchants went to the Chaoyang district to inquire. They were told the project had nothing to do with the government, Zhu said.

But local officials were intimately connected to the project and would soon take an indirect stake in it, according to documents seen by The Washington Post.

In June, 2004, a company was created to manage the Silk Alley market. According to the registration filed with the municipal government, the new company had two shareholders - the developer, Xinya Shuntianfu Commercial Franchise Corp, and a real estate firm, Tianwei Lida Commercial and Trade Corp. At the time, Tianwei's shareholders included 15 officials of the Jianguomenwai subdistrict, among them party secretary Guo Liwen. She was also listed as the new management company's general manager. Guo and the other officials did not respond to repeated requests for comment.

The new firm, Beijing Xiushui Haoseng Garment Market Co, received fees merchants had previously paid to the local government, Xinya president Zhang Yongping said. The old fees had been paid by about 400 merchants and ran to about US$500 a month. Once the new four-story building opens in mid-March, about 1,500 merchants will each pay about US$1,500 a month. Zhang justified the increases by noting the new building is heated and air-conditioned. As the work on the new building began in the fall of 2003, the merchants repeatedly went to see the developer and the local officials. Each time, they were told the new structure had no connection to Silk Alley, Zhu said.

``We figured it was nonsense,'' he said. Zhu and several other merchants hired a lawyer to look into the development. Last spring, he came across documents showing the creation of Haoseng and its links to local officials.

In July 2004, the merchants met local officials in a hotel conference room to discuss the future of the market. One of the officials listed as a Tianwei shareholder attended the meeting, arriving in his black Mercedes, Zhu said.

The local officials confirmed the market's future was uncertain, but said no plans had been made to close it. They repeated that the new building next door had no connection to Silk Alley and insisted local officials had renounced all financial interests.

But while the officials did later transfer their shares in Tianwei to a woman named Zhang Donghong, that did not occur until more than three months later, on November 18, 2004, according to a document filed with the local government.

Two weeks after the meeting, Zhu read in the China Youth Daily newspaper that the developer, Xinya, had purchased land rights for the new building for US$6.2 million, less than one-third the price of a similar site in the area.

Zhang confirmed the purchase price but rejected suggestions it was improper.

He said the discount was justified by his company's expensive investment in the creation of an amenity for the city. ``We acquired this land according to the law,'' he said.

On the morning of December 20, 2004, four police cars pulled up to Silk Alley carrying more than a dozen officers and a subdistrict government official who affixed the notice - the market would be demolished.

``If you do not leave by yourself, our agency will force you out according to the law,'' the notice warned. ``Anyone who interferes with our action will be punished.'' It was signed by the Chaoyang District City Regulatory and Supervision Unit.

On January 6, the bulldozers came and tore down the stalls.

These days, Zhu and the other merchants are trying to find new places to sell their merchandise, while pursuing legal options for compensation - a prospect for which their lawyer, Chen Xiaobing, is not optimistic.

``The merchants are weak,'' Chen said. ``The government is too strong.''