Evergrande Wooed Retail Investors with Gucci bag and Dyson appliance


Shangai — Fascinated by promises of yields close to 12%, gifts such as Dyson air purifiers and Gucci bags, and guarantees of the best-selling developers in China, tens of thousands of investors have gained wealth management products through the China Evergrande Group. I bought.

Many now fear that real estate developers struggling to raise money may not be able to regain their investment after they recently stopped paying back to some investors and sounded a global warning over huge debt. I am.

Some are protesting at Evergrande’s office, refusing to accept the company’s plan to offer payments for discounted apartments, offices, stores and parking lots, which began on Saturday.

“I trusted Evergrande to be a Fortune Global 500 company, so I bought it from the property manager after seeing an elevator ad,” said the owner of the Evergrande property named Du in Guangdong, home of the conglomerate. Told.

“It’s Evergrande’s immorality not to repay the hard-earned money,” said an investor who invested 650,000 yuan ($ 100,533) in Evergrande’s wealth management products (WMP) last year at an interest rate of over 7%. rice field.

Launched as peer-to-peer in 2016, Evergrande Wealth’s sales manager has purchased WMP, which has raised over 100 billion yuan over the past five years, with more than 80,000 people, including employees, their families, friends, and owners of Evergrande properties. It states. A to-peer (P2) online lending platform originally used to finance real estate projects.

He said he couldn’t be named because he wasn’t allowed to talk to the media that the investment of about 40 billion yuan was unpaid.

The Evergrande Group of China did not respond to requests for comment on Tuesday, a Chinese holiday.

Evergrande’s liquidity crisis, with over $ 300 billion in debt, has shaken the global market this week. The company has vowed to repay WMP investors.

Christmas production

Years of effort to deleverage China’s economy have led companies to rely on off-balance-sheet investments for financing.

After Beijing further restricted the debt levels of real estate developers last year, the most debt-ridden players like Evergrande feel more pressure to find new sources of funding to mitigate rising liquidity stress. Management products that rely on employees, suppliers and clients for cash through commercial paper, trust and wealth.

Evergrande Wealth began selling WMP to individuals in 2019 after the P2P lending sector collapsed due to regulatory crackdowns, said the sales manager who purchased WMP and another Evergrande employee.

Each person who purchased WMP of more than 3 million yuan at last year’s Christmas promotion was presented with a Dyson air purifier and a Gucci handbag.

A product leaflet provided by a sales manager as seen by Reuters showed that WMP is classified as a fixed income product suitable for “conservative investors seeking stable returns.”

“De facto ever grande products”

Qingdao construction company raised 1 million yuan with two products sold in November last year, with yields ranging from 7.8% to 9.5% depending on the scale of investment, with annual yields of 1 million yuan and 20 million yuan. I was aiming for. another. The minimum investment was 100,000 yuan and 300,000 yuan, respectively.

Evergrande typically offers certain investors an additional yield of up to 1.8%, which could boost returns of over 11% on a 12-month investment, sales managers say.

The proceeds were to be used to fund the working capital of Qingdao Lvyno International Construction Company, the document said. During the holidays, it was not possible to ask the company for comment.

According to the prospectus, the repayment is either the issuer’s income or Evergrande Internet Information Service (Shenzhen) Co, a subsidiary that operates Evergrande Wealth and promises to cover principal and interest if the issuer fails to repay. It is done from.

The sales manager said the Qingdao company is working on the Evergrande project and will use the payment from Evergrande to repay investors upon completion.

“This is a de facto Evergrande product,” he said.

Other highly leveraged Chinese conglomerates, such as HNA Group and China Baoneng, which declared bankruptcy earlier this year, are using similar products.

Guangdong WMP Investor Group has petitioned various government agencies to improperly use the funds that Evergrande should pay issuers to fund its projects and fully disclose the risks. I blamed him for not doing it.

They also said that Xu Jiayin was sitting prominently at the 2019 celebration of the 70th anniversary of the founding of the People’s Republic of China, and complained that he was confused by the height of Xu Jiayin.

“Investors trusted Evergrande and bought Evergrande’s WMP because of their love and trust in the party and government,” they write.

($ 1 = 6.4655 RMB)

Zhang Yan and Tony Munro