Ex­perts: Be­ware of promised huge re­turns

China Daily (Hong Kong) - - BUSINESS - By CHINA DAILY

As lend­ing com­pany Huay­ingkailai As­set Man­age­ment Co Ltd, the ma­jor in­vestor in the tran­sit el­e­vated bus project, is sus­pected of il­le­gal fundrais­ing amid the sus­pen­sion of the high-pro­file project, ex­perts are rais­ing con­cerns over fraud­sters lur­ing un­sus­pect­ing in­vestors with false prom­ises of huge re­turns from in­no­va­tive and en­tre­pre­neur­ial projects.

The com­pany, a sub­or­di­nate of Huay­ing Group, turned out to be a peer-to-peer fi­nan­cial man­age­ment com­pany il­le­gally col­lect­ing funds for a project sup­pos­edly aimed at solv­ing traf­fic con­ges­tion.

The TEB is a dou­ble-decker bus that holds up to 300 pas­sen­gers on its up­per level and al­lows ve­hi­cles of a height of less than two me­ters to run be­low it.

“The fraud is a typ­i­cal case of a Ponzi scheme.” claimed Shen Meng, di­rec­tor of Chan­son & Co, a bou­tique in­vest­ment bank.

“By lur­ing in­vestors with prom­ises of high re­turns, Huay­ingkailai suc­ceeded in col­lect­ing money di­rectly from in­vestors with no risk assess­ment ca­pac­ity.”

He in­di­cated that with In­ter­net fi­nance be­ing con­tin­u­ally up­graded, fi­nan­cial fraud is tak­ing on more flex­i­ble and de­cep­tive forms.

“Driven by pub­lic en­thu­si­asm for en­trepreneur­ship and in­no­va­tion, the project sim­ply acted as a means to ex­tract money from gullible in­vestors,” Shen al­leged.

In ad­di­tion, in­vestors’ lack of ex­pe­ri­ence also ac­counts for the fre­quent oc­cur­rence of these fi­nan­cial fraud cases.

“The tech­nol­ogy ap­plied in the project is still at its test­ing stage and the fea­si­bil­ity of the project is not high, mean­ing that it ac­tu­ally ought to have been a ven­ture cap­i­tal in­vest­ment project, which

The fraud is a typ­i­cal case of a Ponzi scheme.” Shen Meng, di­rec­tor of Chan­son & Co

would be to­tally un­suit­able for or­di­nary in­vestors,” Shen said.

On July 2, 32 staff from Huay­ingkailai, in­clud­ing its CEO Bai Zhim­ing, were re­port­edly de­tained by Bei­jing po­lice, putting an end to the con­tro­ver­sies, which at­tracted at­ten­tion world­wide af­ter be­ing dis­played at the Bei­jing In­ter­na­tional High-Tech Expo in May 2016.

Con­cerns had been raised on the ve­hi­cle’s fea­si­bil­ity and safety af­ter it was un­veiled by its in­ven­tor Song Youzhou, with crit­ics point­ing out that it was too large and heavy for Chi­nese roads and could not let higher ve­hi­cles pass un­der it.

“In­no­va­tive projects should be sup­ported by the govern­ment,” said Yang Wei­dong, a pro­fes­sor at the China Na­tional School of Ad­min­is­tra­tion, “but fea­si­bil­ity and risk test­ing is a must be­fore this can take place. The govern­ment should shoul­der the most sig­nif­i­cant role in su­per­vi­sion, and then the pub­lic.”

Zhuang Qiange contributed to this story

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