The contest took a tragic turn when one of the mistresses, who was eliminated based on her looks, drove her former lover and the four other women off a mountain road in an apparent fit of anger, the Shanghai Daily reported.
The driver died in the December 6 crash while the man and four other women were hospitalised, the report said.
Initially, it was thought to be an accident, but then details of the bizarre contest emerged in a letter left by the dead woman, a 29-year-old former waitress surnamed Yu, the newspaper said.
The woman met the entrepreneur, surnamed Fan, at the restaurant where she worked in the coastal city of Qingdao in 2000 and became his lover, the report said.
Fan later introduced her to the four other mistresses -- two of his employees and two former clients -- with all given a 5,000-yuan (733-dollar) monthly allowance and rent-free apartment, the report said.
However, when Fan's business ran into tough times, he decided to lay off all but one woman, the report said.
Fan hired an instructor from a modelling agency to judge a private contest he held at a hotel in May, but he did not tell the women about his intentions.
Yu was eliminated in the first-round beauty competition and a woman surnamed Liu eventually won after dominating the drinking round, the report said.
When Fan told Yu she was dismissed and that he was selling her apartment, she decided to exact revenge during a group outing.
After the accident Fan paid Yu's parents 580,000 yuan as compensation for her death. His wife divorced him after learning of his affairs, the report said, adding the other four mistresses also left him.
The tale was reported in other Chinese media, but none gave further details about Fan, such as his age or profession.