The Ordos credit bubble

Wild, Wooly Financing Threads Unravel in Erdos
Coal became a kingmaker in 2004, after the central government lifted price restrictions on the mineral. More than 300 mines in the Erdos area operated by small- and medium-sized enterprises quickly accumulated enormous amounts of wealth, and soon this money flooded into the real estate and private lending markets.
Erdos officials saw the economic risk posed by what became an over-emphasis on coal mines, and started trying to attract manufacturers by offering companies or investors 100 million tons of coal for every 2 billion yuan invested locally.
The gimmick worked, and as of August some 45 projects including auto and electronics manufacturing had gotten under way, with combined investments of more than 320 billion yuan. However, Li admitted that some projects have failed because "management was poor, products were not produced, and companies simply sold their coal."
For example, Hawtai Motor Group in 2006 promised to build a 15 billion yuan auto factory in exchange for two coal mines. One mine was sold in 2008, earning the company 700 million yuan. But today, the 400 hectares where Hawtai plans to build a factory remains vacant.
A classic credit bubble.

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