Key Points:

Police have gone to China to make inquiries into a man who was granted New Zealand citizenship by ministerial prerogative, despite two ongoing investigations here into possible fraud and money-laundering.

Yang Liu was made a citizen in August against the advice of Internal Affairs officials and despite an Interpol alert warning that an arrest warrant was current for him in China.

The arrest warrant is for Yongming Yan, another identity that Mr Liu has used, and relates to alleged fraud and embezzlement of up to a quarter of a billion dollars.

Last year, Australia's Commonwealth Director of Public Prosecutions "repatriated" to China A$3.37 million ($3.8 million) it had frozen in bank accounts opened in the name of "Yang Liu" but operated by Yongming Yan.

Police national headquarters in Wellington would not comment on the state of the inquiry but a police source told the Weekend Herald Mr Liu had been the subject of "quite an intense" investigation by the Asian crime unit.

But this is the first time police have gone to China to make inquiries.

Mr Liu has ties to two Labour MPs and made donations to Labour and National before the 2005 election.

Three ministers have been involved in Mr Liu's case: Internal Affairs Minister Rick Barker, Associate Immigration Minister Shane Jones, and David Cunliffe when he was Immigration Minister.

Citizenship decisions are normally made by the Internal Affairs Minister but because of a conflict of interest Mr Barker delegated his authority to Mr Jones.

Mr Barker and Mr Cunliffe are citing the "ongoing inquiry" into the possibility of immigration fraud for refusing to comment and Mr Jones could not be contacted.

It therefore remains unexplained why Mr Liu was granted citizenship when an investigation into possible immigration fraud was ongoing.

A document leaked to Investigate magazine indicates that five months earlier, Immigration officials believed Mr Liu had the use of several passports and they did not know his true identity.

Citizenship is much more difficult to revoke than permanent residency.

Permanent residency can be revoked in instances where false information was provided and it is standard procedure for the minister to approve revocations.

Labour MP Dover Samuels, a friend of Mr Liu and his family from soon after he arrived here in 2002, has lobbied on his behalf, including writing to Mr Barker.

The MP said Mr Liu would be in danger in China because of an association with Falun Gong.

An Auckland spokeswoman for Falun Gong said Mr Liu had been a supporter "for many years" and had spoken at events, which would put him at risk from the Chinese communist regime.