If you still believe that the phenomenon of bosses running away is and will be a strictly Wenzhou phenomenon, you are wrong.
In the early alert the explosive growth of underground lending and the potential threat, I have already noted that the practice for these underground institutions to charge uber-high interest rates have been growing in many cities around the country, and should be, unsurprisingly, unsustainable. While Wenzhou has been the focus for the time being, something is happening in different parts of the country.
The small county of Shenmu in Shaanxi, a county with population of 370 thousand and GDP of CNY60 billion, became rich, just like the famous ghost city of Ordos, because of coal. Now, just like the famous ghost city of Ordos, the underground lending is booming in Shenmu. Some people have apparently been speculating on the price of coal mine with borrowed money from underground lending.
Meanwhile, a boss in Shenzhen fled away with his family and all relatives working in his company, according to Xinhua. His company was an apparently respectable LED manufacturer, with annual sales of about CNY100 million in 2010. On 8th October, the boss disappeared with his family and relatives, as the company expanded too aggressive even as the market is slowing: the company has recently invested in new facility in Sichuan, which is not bringing much return since it started operating.
The company has CNY30 million loans from China Construction Bank (using eight of the owner’s own properties as collateral), financial leases of CNY17 million, account payables to suppliers of CNY12 million, and unknown amount owed to underground lending (loan sharks). With slowing business and over-expansion, things has got catastrophically wrong.
And now, the employees, suppliers, and some blokes from the loan sharks are standing outside of the company’s office everyday to demand their money back…
This article originally appeared here: Meanwhile, A Boss In Shenzhen Has Disappeared
Also sprach Analyst – World & China Economy, Global Finance, Real Estate
- And This Is How One Businessman In China Disappeared
- China’s Underground Lending: A Shocking 90% Families In Wenzhou Are Involved
- Bad Loans Surge In Chinese Underground Banking System
- Building For Ghosts: Ordos Revisited
- The Great Escape From The Unbearable Burden Of Credit
Read more posts on Also Sprach Analyst »
Business Insider Emails & Alerts
Site highlights each day to your inbox.