Wednesday, 26 October 2011

China police arresting runaway bosses

Chinese police have begun arresting debt-laden entrepreneurs who have gone into hiding to avoid repaying bank loans and their workers' salaries.

1 comment:

Guanyu 道 said...

China police arresting runaway bosses

26 October 2011

Chinese police have begun arresting debt-laden entrepreneurs who have gone into hiding to avoid repaying bank loans and their workers' salaries.

Officials are also trying to prevent indebted bosses from fleeing abroad as China sought to contain the social fallout of a debt crisis, which has led to a string of bankruptcies in eastern Zhejiang province.

Shoe factory owner Rao Dawei, who employs 60 workers, was the first businessman from Wenzhou city to be hunted down by police, reported Xinhua news agency.

He sold his factory equipment and fled Wenzhou with his girlfriend on Oct 14, leaving 800,000 yuan (S$159,000) in unpaid debts and 200,000 yuan in unpaid wages.

He was caught in his home province of Jiangxi four days later.

Rao is just one of the more than 90 owners of small and medium-sized enterprises in Wenzhou whose businesses have folded amid a dire credit crunch.

State agency Xinhua said employees have taken to the streets to protest.

It did not say how many people protested or when the protests took place.

The municipal government paid off the workers' wages to defuse the protest, officials said.

The city's 360,000 small and medium-sized enterprises account for more than 90 per cent of the city's industrial output, which amounted to 271.5 billion yuan in the first eight months of this year, according to government estimates.

These companies have long been supported by a lively private loan market as state banks traditionally prefer state-owned enterprises.

A clampdown on lending in Beijing last year to curb inflation sent interest rates in the private lending market soaring, putting businesses in Wenzhou under immense pressure.

Pyramids of high-interest private lending started to collapse this year as companies whose profits are dwindling due to rising costs and weakening demand default on their debts, according to Associated Press.

Wenzhou, home to some of China's biggest producers of shoes, clothing, cigarette lighters and leather goods, is seen as a barometer of the health of the nation's private enterprises.

Almost all of its businesses are privately owned, much of it by the city's more than 400,000 small and medium-sized enterprises.

Though Wenzhou, a city of about nine million on China's south-eastern coast, accounts for less than 1 per cent of the country's economic output, it has an outsized impact on China's manufacturing and its financial markets.

The city's tycoons hold an estimated 800 billion yuan in private capital and are renowned for driving speculation in property, coal mining and other commodities.

Many of them hold foreign passports, reported Chinese media.

The English-language Global Times newspaper said many debt-laden tycoons are emigrating and transferring their assets overseas through sham bankruptcies.

'Many bosses I know are now going through immigration procedures, so they can move to Canada and shirk all domestic responsibilities once their bank loans and debts hit the bankruptcy standard,' said an unamed local entrepreneur from Zhejiang province.