The ex-wife and daughter of Chinese fugitive Lai Changxing have voluntarily returned to China, ending 10 years of exile in Canada and prompting speculation about the future of a man a Chinese newspaper says has admitted his guilt for the first time.

The case of Mr. Lai, often referred to as “China's most wanted fugitive,” has for years been a sore point in the rocky relationship between Beijing and Ottawa, with China demanding that he return to face charges connected with a $10-billion smuggling scandal.

Canadian courts, however, have blocked his deportation for fear Mr. Lai would be tortured or executed if he were returned to China, as 14 others involved in the smuggling racket already have been. Earlier this year, Mr. Lai was granted a Canadian work permit, a decision that was widely derided in the Chinese media.

The case is central to why China has thus far refused to grant Canada the “approved destination status” it has already awarded to 134 other countries. Without the status, Canada is barred from advertising itself as a tourism destination inside China, and Chinese tour groups are prohibited from going to Canada, costing Canada millions in lost tourist dollars.

In what appears to be the first shift in the decade-long standoff, Mr. Lai's former wife, Tsang Mingna, recently returned to China of her own accord, along with the couple's 23-year-old daughter. And in a rare interview published Thursday in the Chinese Business View newspaper, Mr. Lai appeared to acknowledge that he led a simple but lucrative smuggling scam that cost the Chinese government billions in lost customs duties.

“It is true that I [committed] tax evasion,” Mr. Lai was quoted as saying. “As a businessman, I just wanted to earn more money. I took advantage of the holes in Chinese customs.”

Mr. Lai went on to explain how, while boss of the Yuanhua Group that did business in the southern port of Xiamen in the 1990s, he would wait until dark, when customs officials were off-duty, before moving shiploads of gasoline, cigarettes and other goods through the port without paying duties.

Despite the seeming admission of guilt, Mr. Lai said he would continue his fight to stay in Canada. “[The extradition fight] has lasted for 10 years. I hope it will reach a good result. Now I have a working permit, which is extended once a year. I'm very contented ... If the judge says there is no risk in sending me back, I will appeal. I will keep this case going without stop.”

Challenged by the Chinese journalist, who suggested Mr. Lai should accept the punishment for his crimes under Chinese law, Mr. Lai hinted that he might, if he were facing lesser penalties. “Tax evasion should be punished by fines, or some time in prison,” he said.

Just Wednesday, China executed two executives convicted in a $127-million investment scam.

Ms. Tsang's decision to return was surprising given that she has been named as one of Mr. Lai's co-conspirators. Her return last month appears to have coincided with the release of her brother, who had been jailed in connection with the Yuanhua smuggling scandal.

China's official Xinhua news agency Thursday hailed Ms. Tsang's repatriation as “the latest breakthrough in China's efforts to win Lai's extradition.” Mr. Lai and Ms. Tsang divorced in 2005.

Immigration Minister Jason Kenney told a Vancouver television station this week that the Canadian government played no role in Ms. Tsang's departure.

Mr. Lai's lawyer, David Matas, said it was curious that Ms. Tsang had been allowed to return to China without facing charges, given that she was once described as a key part of the smuggling ring.

“The wife got divorced and China lost interest in her because she's no longer useful as leverage versus Mr. Lai. Which just shows what a fabrication this whole thing is,” he said.

Mr. Matas said he hadn't seen his client's interview with Chinese Business View, but said even an admission of guilt wouldn't affect Mr. Lai's court proceedings in Canada, since the courts were already working on the assumption that Mr. Lai would be convicted if he were deported back to China.

Some immigration experts suggested that the fact Ms. Tsang apparently faced no punishment on her return to China undermines Mr. Lai's argument that he would could face torture or execution if he were deported there.

The Chinese government has already promised not to execute or mistreat Mr. Lai, an assurance that wasn't enough for a Federal Court judge who ruled in 2007 that torture was too widespread in China for Canada to accept the word of Chinese officials in Mr. Lai's case. China also executes more people each year than the rest of the world combined.

In the interview with China Business View, Mr. Lai characterized his life in Canada as “so-so” and said he would like to go back to China some day. “It has been 10 years. I miss my hometown so much,” he said, “and hope one day I can return to the motherland.”