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Bosses disappear as debts mount
By Lydia Chen |
September 24, 2011, Saturday
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Print Edition
Print Edition
Wenzhou in eastern Zhejiang Province is battling its own subprime lending crisis after seven company bosses fled the city in the past 10 days, leaving thousands of employees in a state of shock and up to hundreds of millions of yuan in loans unpaid.
Most of the bosses who have disappeared were in the manufacturing industry, according to yesterday's National Business Daily. Each had borrowed hundreds of millions of yuan from banks as well as private creditors, the newspaper said.
Private lending in Wenzhou, the cradle of China's private sector, has been booming since the country started monetary tightening late last year to fight inflation. State-owned banks, under orders to maintain a stable loan-to-deposit ratio, are reluctant to offer loans to small firms like those in Wenzhou over default concerns.
The difficulty of borrowing money from banks has forced some small business owners to turn to private lending, mostly illegal, for help despite the high cost. However, when business doesn't run well as expected, small business owners find themselves unable to pay their debts.
Hu Fulin, founder of the Zhejiang Center Group, one of China's biggest spectacles makers, has not been at work since early this week and called in on Wednesday to say he was unable to sustain the company's liquidity any longer, the newspaper said.
Hu's company has 3,000 employees and produces 20 million pairs of glasses a year. Hu is also involved in the real estate and solar power industries, according to the newspaper.
The 21st Century Business Herald said that Hu was in debt up to around 2 billion yuan (US$313 million) and was now in the United States.
The news of Hu's disappearance triggered panic among many of his suppliers who have been gathering at his factory demanding payments of loans and unpaid business deals, the National Business Daily said.
Hu also owes a total of 10 million yuan in salary to his employees for their work in August and September, it added.
The local government has set up work teams trying to solve the problems at Hu's company, the report said.
Meanwhile, Wenzhou businesswoman Zheng Zhuju has been in police custody on charges of illegal business operations since September 13.
Zheng, who owes 280 million yuan to private lenders and banks, had attempted to flee Wenzhou with hundreds of millions of yuan in cash, police said.
The 49-year-old is the legal representative of a Wenzhou home appliance chain store, selling products from companies such as Siemens, Sony, LG and domestic brands Midea and Haier, police said.
Most of the bosses who have disappeared were in the manufacturing industry, according to yesterday's National Business Daily. Each had borrowed hundreds of millions of yuan from banks as well as private creditors, the newspaper said.
Private lending in Wenzhou, the cradle of China's private sector, has been booming since the country started monetary tightening late last year to fight inflation. State-owned banks, under orders to maintain a stable loan-to-deposit ratio, are reluctant to offer loans to small firms like those in Wenzhou over default concerns.
The difficulty of borrowing money from banks has forced some small business owners to turn to private lending, mostly illegal, for help despite the high cost. However, when business doesn't run well as expected, small business owners find themselves unable to pay their debts.
Hu Fulin, founder of the Zhejiang Center Group, one of China's biggest spectacles makers, has not been at work since early this week and called in on Wednesday to say he was unable to sustain the company's liquidity any longer, the newspaper said.
Hu's company has 3,000 employees and produces 20 million pairs of glasses a year. Hu is also involved in the real estate and solar power industries, according to the newspaper.
The 21st Century Business Herald said that Hu was in debt up to around 2 billion yuan (US$313 million) and was now in the United States.
The news of Hu's disappearance triggered panic among many of his suppliers who have been gathering at his factory demanding payments of loans and unpaid business deals, the National Business Daily said.
Hu also owes a total of 10 million yuan in salary to his employees for their work in August and September, it added.
The local government has set up work teams trying to solve the problems at Hu's company, the report said.
Meanwhile, Wenzhou businesswoman Zheng Zhuju has been in police custody on charges of illegal business operations since September 13.
Zheng, who owes 280 million yuan to private lenders and banks, had attempted to flee Wenzhou with hundreds of millions of yuan in cash, police said.
The 49-year-old is the legal representative of a Wenzhou home appliance chain store, selling products from companies such as Siemens, Sony, LG and domestic brands Midea and Haier, police said.
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