Xinqi Asset default stirs anger among investors
The failure of a fundraising scheme by Xinqi Asset that affected more than 5,000 mainlanders has provoked ire among investors,
amid growing suspicions about the legality of the businesses and the government’s role in the company’s development.
Dozens of Shanghai residents gathered at the police station in Pudong yesterday to report the case as they accused Shaanxi province-based Xinqi of fraudulently raising capital to fund property projects.
Xinqi, founded by Jia Huanqi, who is also chairman of the asset management firm, failed to pay back investors principals and interest earlier this week.
Xinqi netted multi-billion yuan from investors across the nation in the past year by promising guaranteed returns of more than 13 per cent a year.
But victims are grumbling about a group of government officials and celebrities including Chinese Premier Li Keqiang for their roles in helping promote the company and its wealth management products.
“I feel it safe to describe the company as a swindler as it always pretends to be a powerful company with strong crisis management capabilities,” said Zhu Minghao, a middle-aged investor who channelled millions of yuan into Xinqi’s product. “We made a mistake after we were convinced of the business model and the company’s financial strength.”
Xinqi, listed on the Shanghai Equity Exchange, an over-the-counter equity transfer market, received endorsements from the government and state-owned media such as China Central Television (CCTV).
In October 2014, Jia was among a clutch of company bosses to accompany Premier Li’s state visit to Kazakhstan and made a speech on a business forum during the visit.
Xinqi was also awarded a top brand by a conference hosted by CCTV, Global Times and China National Radio, the key media organisations under the Communist Party’s propaganda machine.
“We are little guys and we tend to trust the powerful organisations and celebrities that supported the company,” said Wang Wenyuan, a senior in Shanghai. “The authorities have the responsibility to find out for us whether the company was trying to defraud us.”
The company and its chairman couldn’t be reached for comment Friday.
Celebrities that helped promote Xinqi’s products included Shui Junyi, a well-known CCTV anchorman, and famous actor Zhang Tielin.
The default added to evidence that China’s shadow banking system and the loosely regulated online peer-to-peer (P2P) lending sector were facing increasing risks.
Last year saw the collapse of the Fanya Metals Exchange, once the world’s biggest rare metals trading platform. On an even larger scale, the P2P operator Ezubao incurred close to 100 billion yuan in losses, affecting more than 1 million investors.
The mainland leadership is striving to transition to a growth model driven by vigorous entrepreneurship.
Xinqi fit into the category of financial innovations as leveraged a securitised asset model.
The company uses properties under development as collaterals to raise money from individuals before ploughing the money into new projects.