The mysterious lure of a failed bus project
Imagine a bus with an elevated passenger compartment that spans the width of two traffic lanes, with its undercarriage fitted with wheels riding along the edges of the two lanes to allow vehicles less than 2 meters high to pass underneath.
Well, a self-proclaimed inventor Song Youzhou designed such a bus, called the transit elevated bus, in 2010. Last year, his partner made a prototype and gave it an easy-to-remember name: Batie.
But the prototype failed the road test last August. It could only travel 100 meters in a straight line without making any turn.
Despite the failed road test, however, Beijing-based Huayingkailai online financing company started raising funds for Batie last year on the promise of paying annual returns of as high as 12 percent with the “ticket revenue”. In fact, it raised a lot of money.
Worse, Huayingkailai has reportedly not paid back its investors since the beginning of this year, and 32 of its staff members, including board chairman Bai Zhiming, have been detained by Beijing police on suspicion of illegal fundraising. The case is expected go to trial soon, and none of the suspects found guilty by the court will escape punishment.
It could be safely said now that the Batie bubble has burst. Some media outlets have quoted an insider as saying the company owes investors 4 billion yuan ($588.47 million). Although the figure has not been confirmed, the company’s debt is indeed very big, as reports said Batie attracted at least 40,000 investors.
Two questions arise: How could Huayingkailai use a failed project to fool investors and raise a huge amount of money? And how can similar frauds be prevented?
Bai succeeded because he used his “connections” with certain local officials, as Huayingkailai’s records show it worked with at least four local governments on Batie — Zhoukou and Nanyang cities in Henan province, a district in Tianjin and Qinhuangdao in Hebei province.
According to local media reports, in December 2015 the then mayor of Zhoukou city attended the signing ceremony for a cooperation deal with Huayingkailai even though the Batie project was widely criticized after failing road test, and the company uploaded the group photographs on its official website. Such events might have misled people into believing Batie was part of a government project.
That local officials want to attract more investments is understandable, but before supporting the Batie project they should have consulted technology experts to determine whether or not the idea was practicable.
Of course, some people were lured by the high return rate offered by Huayingkailai, which is surprising because the interest rate for one-year deposits in banks is only 1.5 percent. Before investing, people must ascertain whether the project they want to put their money in is sustainable. In this internet age, anybody, especially potential investors, can easily learn about the risks of investing in a company before taking a decision.
In this internet age, anybody, especially potential investors, can easily learn about the risks of investing in a company before taking a decision.
The author is a writer with China Daily. email@example.com