Fanya Exchange’s 36 billion yuan default 'tip of iceberg' in China

Rhodium and steel to garlic and onion, you name it, they trade it. Hundreds of these so-called commodity exchanges, which have mushroomed across the mainland in a regulatory void and attracted 1 trillion yuan in investments, are now under the microscope.

Beijing this week was treated to a rare sight of protesting investors wielding banners outside the office of the country's top securities authority, complaining they were duped by the Fanya Metals Exchange in Yunnan province.

But Fanya, say industry insiders, is only the tip of the iceberg.

"There are at least 400 such exchange platforms in China, managing roughly one trillion yuan of assets," said Wang Hongying, head of the China Financial Derivatives Investment Research Institute. "Local governments have been very supportive of these exchanges as their turnover adds to the local GDP data."

The angry investors, wearing T-shirts calling Fanya a "scam", demanded the central government investigate Fanya for defaulting on 36 billion yuan it owed investors. The exchange had promised double-digit returns on a punt on metal prices increasing, a bet that went horribly wrong as commodity prices collapsed worldwide.