SHANGHAI, CHINA - A SHANGHAI tycoon who made his fortune building highways is at the centre of a 4.3 billion yuan (S$854 million) fraud investigation, state media reported on Wednesday.

Police detained Liu Genshan, 51, one of China's richest men, a week ago on suspicion of money laundering and fraudulent bank loans, the Shanghai Daily said.

His business strategy was to buy highways using bank loans and turn them into listed companies, the report said. Mr Liu reportedly financed seven highways in Shanghai and neighbouring Zhejiang province.

Hong Kong's Securities and Futures Commission noticed in 2005 that three billion yuan Liu brought to the territory from the mainland was not transferred through proper channels, the newspaper said.

He allegedly used the money to buy a Hong Kong-listed company, which he renamed Maosheng Holdings, the report said.

The Hong Kong company was believed to be the biggest shareholder in a highway linking Shanghai's downtown to industrial zones in suburban Qingpu, the report said.

Although the road cost 420 million yuan to build, the company's official investment was listed as more than eight times that - at 3.5 billion yuan, the report said.

Investments in other projects were apparently similarly inflated while construction on two was halted due to a lack of funds, the newspaper said.

Mr Liu was born in Shanghai but is officially a permanent resident in Hong Kong where he has 1.13 billion Hong Kong dollar (S$177 million) invested in a Hong Kong-listed real estate and hotel development company, the report said.