Which brings us to a "warehouse financing" scam in China which now appears to be unwinding, forcing speculators to liquidate their real estate and commodities positions. Behind the scenes Beijing is furious with the speculators.
Essentially, the scam involves speculators getting loans which are supposed to be for buying base metals such as copper. Instead, they buy land then sell it before they have to settle on the commodity purchase.
It works like this. You are a property developer in China. You are already over your gearing limits and can't get more finance at home. You can't get the approvals to borrow offshore either. So, you use trade credit finance to fund your real estate deal. An associate then buys a stake to give you cash to pay for your copper. Later, the loan is repaid with the development proceeds.
A rising market hides all kinds of flaws. And fraud. Lots of fraud.