Vig­i­lance re­quired against fraud­u­lent rais­ing of funds

China Daily (Hong Kong) - - COMMENT - ON SUN­DAY,

the Bei­jing po­lice an­nounced that Bei­jing-based as­sets man­age­ment com­pany Huay­ingkailai is sus­pected of il­le­gal fundrais­ing ac­tiv­i­ties, and 32 sus­pects, in­clud­ing its chair­man Bai Zhim­ing, have been de­tained on crim­i­nal charges. The news made head­lines na­tion­wide be­cause the com­pany has been rais­ing money in the name of de­vel­op­ing the Tran­sit El­e­vated Bus, even though the bus had failed its road test. South­ern Me­trop­o­lis Daily com­ments:

It was in 2010 that Song Youzhou, the in­ven­tor of the el­e­vated bus, first raised the idea of a lane-strad­dling bus that would al­low cars to pass be­neath. He said it would ease the pres­sure on the roads. How­ever, many ex­perts pointed out prob­lems with the idea, such as how it would make turns at junc­tions, and the pos­si­bil­ity of ac­ci­dents as a re­sult of those driv­ing be­neath feel­ing un­der pres­sure.

There­fore the ini­tial en­thu­si­asm for the bus soon cooled. But in 2015, Bai bought the patent from Song and raised the idea again in public, chang­ing its name to Batie. Last Au­gust, Bai made a sam­ple bus and pub­licly tested it on the road, but it could only travel for­ward, with­out mak­ing any turns. The tech­no­log­i­cal prob­lems re­main un­solved and Batie proved a fail­ure.

How­ever, de­spite that, Bai and his com­pany launched fundrais­ing pro­grams for the bus. They promised an an­nu­al­ized re­turn rate as high as 12 per­cent, and told in­vestors they would pay the money with the ticket rev­enue. One does not need to be a fi­nan­cial ex­pert to know how ridicu­lous such a pro­gram is. The bus failed its road test so it could not pos­si­bly run on the road within years. The “ticket rev­enue” Huay­ingkailai promised was there­fore fic­ti­tious.

No won­der Huay­ingkailai was re­ported to be un­able to pay its in­vestors ear­lier this year, and the po­lice are in­ves­ti­gat­ing its fundrais­ing ac­tiv­i­ties. Worse, more me­dia re­ports show that sev­eral com­pa­nies re­lated to Huay­ingkailai have been sus­pected of il­le­gal fundrais­ing.

The case should teach us a les­son: How could they cheat with so sim­ple a lie? Some say it is the high re­turns that at­tracted the in­vestors, but there are more rea­sons than that. First, Bai and his team con­veyed the idea that the bus was a high-tech in­no­va­tion.

Sec­ond, some lo­cal gov­ern­ments pub­li­cized the bus. For ex­am­ple, af­ter Bai signed con­tracts with the lo­cal govern­ment of Zhoukou, a city in Cen­tral China’s He­nan prov­ince, the govern­ment boasted about the bus on its of­fi­cial web­site, which many in­vestors be­lieved gave the project the govern­ment’s seal of ap­proval.

It is time to learn the lessons from this. New ideas should be en­cour­aged, but we must be care­ful not to let il­le­gal fundrais­ers make use of them.

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