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Mark O'Neill

A man who launched a fast food rival to McDonald's has been charged with stealing 23 million yuan (about HK$21.5 million) from the public after illegally offering annual interest rates of 25 per cent on loans to fund his restaurant chain, according to reports.

According to Legal Daily, Qiao Ying got the idea for the scheme when he went to Beijing in 1994 and saw the success of McDonald's on Wangfujing, the city's main shopping street.

He decided to launch a Chinese rival, Red Sorghum, but served noodles, not hamburgers.

The first restaurant opened in his native Zhengzhou, capital of Henan province, in April 1995, and was a success.

The next year, Qiao opened another branch near a McDonald's in Beijing.

The media soon took up the subject, saying Red Sorghum was challenging McDonald's for supremacy in the Chinese market. Qiao announced that, by 2000, he would open 20,000 branches worldwide - 70 per cent in China and 30 per cent abroad.

Needing money to fund such an ambitious expansion, Qiao and his two top associates began raising capital from the public, offering annual interest rates of 25 per cent.

Between 1996 and 1998, more than 800 people gave 31.53 million yuan, a portion of which was apparently used to open more than 20 new branches.

The People's Bank of China forbids such fund-raising. It also sets interest rates and strictly controls the organisations that are allowed to take deposits from the public.

One by one the branches closed, leaving a trail of debt totalling 36 million yuan.

Of the 31.53 million yuan raised, 23.07 million yuan has never been recovered.

Qiao was arrested at the end of 2000 and on Monday formal charges of illegally raising money from the public were filed against him by prosecutors in the Jinshui district of Zhengzhou city.

An official of the Jinshui prosecutor's office said Qiao and his two associates were imprisoned in the Number One Detention Centre in Zhengzhou and the case would come to trial within a month.

'For a crime of this magnitude, I expect a sentence of less than 10 years. We have had many frauds in Zhengzhou but this is a first for illegal fund-raising,' he said.



Restaurateur charged with theft after illegal fund-raising