Friday, April 20, 2012

Desperate Local Governments Coercing Workers into Contributing to Development Trust

Chinese Local Governments Are Forcing Workers To Invest In Bubble Schemes
Sina reports a ridiculous story of teachers (and many others) in Liangshan, Shandong, are being asked (or forced) to buy a wealth management product issued by a trust, apparently (does it ring a bell?). The one-page document on this particular product (shall I call it a prospectus?) said the government is trying to raise RMB200 million, with a maturity of 3 years, and interest rate of 10%. The money being raised will be used for “urban construction”. One teacher said he was asked to invest in RMB10,000 of this thing, which is a huge amount for him (worth half a year of his salary). Other teachers and staff are being asked the same, and are being warned that they will have no chance of being promoted if they do not buy these products. According to the report, Liangshan county government is not the only one which are trying to force people into lending money. Many other countries’ and cities’ local governments are doing similar things. Very desperate indeed.
Google Translation of original article here
Liangshan County, trust and wealth management products to understand the paper clearly written, issued a total of 200 million yuan, products period of three years; annual interest rate of 10%; Interest is paid yearly, the principal one-time payment due. 200 million funds will be used for urban construction, some workers have questioned only for urban infrastructure construction financial products, how to achieve a profit and pay interest of 10 per cent of a year? Mr. Lee: 10% a year, this non-profitable investment in urban infrastructure. Investment in urban infrastructure, this rate of return, he said three years, ten years can not be. Trust and wealth management products, 10 percent of the Facilitation is relatively high. The high-yield corresponds to the high risk. The two Liangshan County, trust and wealth management products to understand the paper, no mention of the investment risk. At the same time, many workers said their units do not have to do more presentations on the Trust financial products. Therefore, it seems, Renmin University of China School of Finance, Professor Tu Yong, the government in this form of sale of trust and wealth management products, and not fully disclosed the risks of investing, there is mandatory financing and fraud suspects.
At least someone is questioning that the returns are out of line with an infrastructure product.

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