Investors warned over canal scam

Three central government ministries have issued a directive warning investors and construction companies not to take part in a canal project in northern China which has not been approved by the authorities.

The Ministry of Water Resources, the State Planning Commission and the Ministry of Communications jointly issued a directive saying recent fund-raising campaigns concerning the 'Shoutian Canal' were fraudulent.

The directive said the Government had begun researching the building of a canal in the Tianjin area in northern China in 1989. The project was not feasible and the plan was dropped.

But a group is now claiming it has obtained State Council approval and has started to raise funds from investors at home and in Hong Kong.

The directive said a company called Shoutian Canal Development Corporation engaged a company in Shanghai to publicly raise funds.

In addition, the Shanghai firm signed up construction companies to build the canal and each of these companies paid as much as 20,000 yuan (HK$18,570) for these contracts. Some of these phoney contracts even concerned the 'second phase' of the non-existent project.

The investment the fraudsters suggested ranged from sponsorship and sale of stocks, the China News Service quoted the directive as saying.