The Classic China Scam: Done Often Because It Works

Got an email the other day from the owner of a leading Northwest interior design firm. This person who has asked to remain anonymous, wanted to tell me about how he and his company had been scammed, so as to prevent others from suffering the same fate. 

My response was to say that we have written about this very scam a few times previously but that it has been long enough since the last one that we would do it again.

Here goes.

I want to tell you about what happened to us for the sole purpose of allowing other small businesses the chance to find this thread when searching for information on business opportunities in China, specifically Kunming in my case.

In August, 2014 I was contacted by Mr Chen _________ with the opportunity to complete interior design drawings for 56 luxury villas in Kunming.

This is the official headquarters information the scammers are using on emails: [we are leaving out the specific identifiers on the off chance that the Chinese individual and alleged company have some explanation.  I say alleged company because I would be that there is no company.]

Like many of our larger new jobs, we are expected to provide our own transportation to the first meeting. I did this by flying from San Francisco to Kunming to meet with the fraudulent company. Upon my arrival to Kunming, I was picked up by a driver and taken to my hotel, the next morning Mr Chen met with me to review the contract and the site plans. I was then taken to lunch and we discussed any changes that would need to be agreed upon with the extensive contract (written in english). At the end of lunch I was told there are some Chinese cultural differences that we must honor and one is providing gifts to the local authorities and banker. They suggested I buy 50-60 cartons of very high end cigarettes for this purpose.

At this point I had my first hint that something felt odd, but then the day was filled with a site visit, a presentation in a large conference room of my portfolio and their feedback on the likes/dislikes of the interior design. So I felt maybe they were trying to get some cigarettes from me but the project of designing 56 luxury villas in Kunming seemed legit.

The next day I met more members of the organization and we signed the contract, took celebratory photos and had a dinner with 5-6 other people that evening. I was never asked to pay for any transportation or meals/drinks while in Kunming as the host paid for these items.

Upon getting back to the US, I provided my banking information for the wire transfer of the first payment of 20% of the project before starting the work. The next few emails were from _________, Financial Manager of Yunnan ______Construction & Engineering and this is when I knew they had an elaborate scam going with interior designers. They wanted me to provide a remittance fee to ______ bank account, since this couldn’t be paid from their “corporate account.”

I had done extensive research before buying my plane ticket and I couldn’t find any negative or contrary information about the project, so I was optimistic about the project. But after receiving the emails where they are asking for large sums to be deposited to their private bank accounts I then began to search again and this new thread popped up.

I’m not sure what can be done to these people from so far away, but I’m hoping this post will help enlighten others of the scam and fraud that these people are doing in Kunming under the disguise of developers looking for interior design or interior decoration from foreign companies.

I then asked for information regarding exactly what this Northwest company had paid for and learned that they had also paid about $150 a night for hotel rooms while in Kunming. I noted that was probably three times what the hotel ordinarily charges and that these same people probably had a deal with the hotel to pocketed the difference. The Northwest company wrote back and agreed, after looking up the normal rate at the hotel at which they stayed.

There you have it. The classic China scam to get a service company to go to China, making hundreds of dollars a night on overpriced hotel rooms and with the potential to make much more on things like cigarettes and remittance fees.

Over the years, we have been asked to perform basic due diligence for many American and European service companies before they go to China. In most instances, we have relatively rapidly become convinced that our client is in fact caught up in a scam, without our client having to go to China at all. We do this by first determining whether our client is dealing with a real company — most of the time they are not. There are all sorts of other checks as well that can and should be done before you leave. In the story above, the company got off with losing money — sometimes worse happens.

You have been warned. Again.

For more on this particular scam, check out Ancient Chinese Business Scam With A New Hollywood Twist. It’s Baaaack. and Ancient China Business Scam With A New Hollywood Twist.

We will be discussing the practical aspects of Chinese law and how it impacts business there. We will be telling you what works and what does not and what you as a businessperson can do to use the law to your advantage. Our aim is to assist businesses already in China or planning to go into China, not to break new ground in legal theory or policy.