Chinese Investors Protest and Demand their Money Back from the Government As New Chinese Cities Remain Empty

Mish reported a few weeks backs:

Hello Mish
In Yangzi Delta Region alone, there are dozens of so called “International Garment Cities”. These cities are built under the direction of a local government investment plan. In many cases, huge parcels of land are sold to real estate developers, who promote the sale of individual shops which are to be built inside the garment city. The marketing material often carries the promise of “ high investment return” and “developer will rent” to lure the retail investor from all over China.
However, many so called “garment cities” are very poorly positioned. Moreover, they are a hybrid of department store, factory outlet, distribution center, and many of them have a 50% vacancy rate or higher due to the over expansion in this sector.

China is famous for its giant projects that received names like “ International Fabric City”,” Shoe City”, ‘Leather City” ,“Trading City”, etc. They are everywhere; the vacancy rate is 3/4, while developers were promised a guaranteed return and “Lease Return”. As one “Fabric City” in Jiangshu collapsed; shop investors were protesting and demanding their money back from the local government. (Since local governments are the owners of the land and the promoters and beneficiaries of the construction of the new cities.)
A few days ago another huge ponzi scheme collapsed in Guangzhou. This time, the developer “China Weiguo Group” failed to deliver the promised lease payments to shop investors in the “International Trade City”, “Shoe City” and “Digital City” in Guangzhou. Thousands of angry investors found out the city occupancy rate is very low, and stormed the headquarters of “China Weiguo Group” in Guangzhou. 300 million Yuan worth of investments were lost.

Just like every ponzi scheme, an unrealistic return was promised, while the underlying business model was unsustainable. Many retail investors poured their money in, only to find out they lost everything.

For the full story in Mandarin, please click HERE
‘China Weiguo Group” developed dozends of similar “City Projects” all over China with similar “return guarantees“ and “Lease Back” or “Buy back “ schemes. Among them, in August, was another project named “Giangzhou Fabric City” in Changsha (capital city of Hunan). The scheme collapsed, and 500 million Yuan worth of investments were lost.

For the Changsha “Guangzhou Fabric City” Ponzi scheme story, please check HERE

Below is a TV advertisement from a year ago that promoted the ”Guangzhou Fabric City” with a promised 60% 5 year return and guaranteed return of principal.

This video is from the Hunan Province TV that talks about the troubles facing “Guangzhou Fabric City”, while shop owners are protesting.

One of the astonishing things about this ponzi scheme is that as early as 2008, articles have already exposed “Guangzhou Weiguo Group” as a ponzi scheme, and plead party leaders of Guangzhou city to intervene, but at that time, no action was taken.

In an article from Oct 2008, a Chinese news source provided a list of ponzi companies in Guangzhou city alone. According to that article, more than 20 “investment companies” defaulted in 2008. (That happened for a short time all across China before the government stimulus lifted the real estate market once again). According to the article, more than 40 similar ponzi schemes were still actively seeking investors. Even though 36 ponzi scheme operators fled.

By the way, the founder and ring leader of Guang zhou “Weiguo Group” has been listed as one of the 10 people who “moved China in 2009″.

                                            Yan Wei Guo, founder and leader of “Weiguo Group”

These investments groups are part of China’s Shark Loan Ponzi Finance that was covered in detail in this site. The most important articles on the subject are:

A Visualization of China’s Bubble Economy

Special Report- The Secret Engine Behind China’s Housing Bubble- The Ponzi Shark Loan Finance

China’s Inter-Company Lending Ponzi Dynamics

China’s Shark Loan Ponzi Finance- As Ponzi Schemes Collapse the Chinese Government Fears Civil Unrest

Read the original story at Israel’s Financial Expert