Sinopec Sichuan sales office: King of the loan sharks? Usury scandal may be the tip of the iceberg

Many Chinese firms from all sectors of the economy are involved in the real estate industry, although this has cooled along with the property market. Many companies developed property or opened separate real estate development divisions, while others bought property for investment. State-owned companies also joined the speculative fervor and have a natural advantage thanks to favorable credit terms at state-owned banks. The simplest transaction would have been to loan capital to developers at higher interest rates.

Sinopec Sichuan is alleged to have taken this strategy to the level of loan shark. In all the stories of Wenzhou, the story was of a tight credit market and very high interest rates, but I didn't come across a nefarious element. The term loan shark was used in the press, but it was never presented as a criminal enterprise. The Sinopec Sichuan story is different because the firm is accused of making high interest rate loans to a private developer in order to force bankruptcy and take control of the firm.

房产商举报中石化四川销售公司高息放贷、侵吞民营房企 (Real estate developer reports Sinopec Sichuan Sales Company made high interest loans, annexed private firm)

What follows is my translation:
"I painstakingly ran this company for more than 30 years and overnight, ownership changed." Former chairman of Sichuan Jinxin Development told reporters on February 7 that in October of last year, on its own initiative the head office of ICBC bank switched the shareholders and legal representatives of the firm.
The reporter called Sinopec Sichuan Sales chairman Huang Jiuchang (a high ranking Communist party official) to get his side of the story, but his phone was shut off. The reporter also called Sinopec's PR office, with the same result.

The article gives a history of the firm, which started as a government company in 1980. In 2006, the firm had 5 million yuan in registered capital and that rose to 8 million in 2007. Liu Ming controlled 87.55 of the equity. On December 31, 2010, Sinopec Sichuan said Sichuan Jinxin owed the firm 104 million yuan in principal and 54 million in interest. The interest rate on the loan was 36% and Sinopec says the sales division is there to strengthen the firm's sale of refined oil products.

四川中石化高利贷续:高官被指偷卖民企上亿项目 (Sinopec Sichuan usury continued: High official accused of stealing over 100 million yuan) Not sure of the exact translation as the headline combines the word steal and sell, i.e. the official seized the private firm and sold it for personal profit
Today, Sichuan Jinxin's legal representative Pu Jie revealed evidence, every piece of which shows that this usury case is just the tip of the iceberg.
The article goes on to detail several subsidiaries made loans to Sichuan Jinxin.

This is a story that broke late last week, but it's still a breaking story as the latest developments came out today. This involves a major state owned company and high ranking party officials, so information may be slow to come out. At this point, the narrative is that the firm was used as a conduit for private business dealings, which were nothing more than loan sharking. (As one Chinese friend described it, it is like when the mafia comes and tells a business owner that he "needs" a loan. This gives an idea of how the story is being portrayed in online and private conversation.) However, this narrative is part evidence, part media/Internet speculation and facts often turn out to be much different. At the very least though, this is a clear cut example of bubble behavior because even if the loans were legal (though what must be a gross violation of Sinopec policies), the developer was using massive leverage.

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