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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsMega Default In China Scheduled For January 31
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1/19/2014 @ 8:08PM
Gordon G. Chang Contributor
On Friday, Chinese state media reported that China Credit Trust Co. warned investors that they may not be repaid when one of its wealth management products matures on January 31, the first day of the Year of the Horse.
The Industrial and Commercial Bank of China sold the China Credit Trust product to its customers in inland Shanxi province. This bank, the worlds largest by assets, on Thursday suggested it will not compensate investors, stating in a phone interview with Reuters that a situation completely does not exist in which ICBC will assume the main responsibility.
There should be no mystery why this investment, known as 2010 China Credit-Credit Equals Gold #1 Collective Trust Product, is on the verge of default. China Credit Trust loaned the proceeds from sales of the 3.03 billion-yuan ($496.2 million) product to unlisted Shanxi Zhenfu Energy Group, a coal miner. The coal company probably is paying something like 12% for the money because Credit Equals Gold promised a 10% annual return to investorsmore than three times current bank deposit ratesand China Credit Trust undoubtedly took a hefty cut of the interest.
Zhenfu was undoubtedly desperate for money. One of its vice chairmen was arrested in May 2012 for taking deposits without a banking license, undoubtedly trying to raise funds through unconventional channels. In any event, the company was permitted to borrow long after it should have been stoppedreports indicate that it had accumulated 5.9 billion yuan in obligations. Zhenfu, according to one Chinese newspaper account, has already been declared bankrupt with assets of less than 500 million yuan.
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1/19/2014 @ 8:08PM
Gordon G. Chang Contributor
On Friday, Chinese state media reported that China Credit Trust Co. warned investors that they may not be repaid when one of its wealth management products matures on January 31, the first day of the Year of the Horse.
The Industrial and Commercial Bank of China sold the China Credit Trust product to its customers in inland Shanxi province. This bank, the worlds largest by assets, on Thursday suggested it will not compensate investors, stating in a phone interview with Reuters that a situation completely does not exist in which ICBC will assume the main responsibility.
There should be no mystery why this investment, known as 2010 China Credit-Credit Equals Gold #1 Collective Trust Product, is on the verge of default. China Credit Trust loaned the proceeds from sales of the 3.03 billion-yuan ($496.2 million) product to unlisted Shanxi Zhenfu Energy Group, a coal miner. The coal company probably is paying something like 12% for the money because Credit Equals Gold promised a 10% annual return to investorsmore than three times current bank deposit ratesand China Credit Trust undoubtedly took a hefty cut of the interest.
Zhenfu was undoubtedly desperate for money. One of its vice chairmen was arrested in May 2012 for taking deposits without a banking license, undoubtedly trying to raise funds through unconventional channels. In any event, the company was permitted to borrow long after it should have been stoppedreports indicate that it had accumulated 5.9 billion yuan in obligations. Zhenfu, according to one Chinese newspaper account, has already been declared bankrupt with assets of less than 500 million yuan.
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Mega Default In China Scheduled For January 31 (Original Post)
DeSwiss
Jan 2014
OP
FreakinDJ
(17,644 posts)1. Chinese Government flush with cash from VAT on products sold to USA
I hardly see them allowing this to happen
They might publicly execute a dozen or so Bank Executives
DeSwiss
(27,137 posts)2. After a fair trial, of course.
- Maybe we should try Chinese capitalism ourselves......