SDB Club Benchmark Real Estate

Local governmental officials that are demanded from the government to produce double digit GDP growth numbers give real estate developers permits to build housing projects in return for bribes. They also get bribes in return for allowing the shark loan companies to operate under their jurisdiction. Some of them are active partners in shark loan businesses. For example, a party secretary of legal affairs, that controls the public security bureau, which is a court and prosecutor division of government in Yanking city, in She Kiang province tired to run abroad using a passport in 2009 after he found out he can’t repay 60million Yuan. Every scheme has a ring leader whose job is to collect money from all the participants in the ponzi scheme. When some of these ponzi schemes blow up, the party leaders always get bailed out first, and some even ask local business owners to lend them money, and then bail out their own personal fund. After that the ring leader turns himself in and gets protection from the local government.

Most of the funds that are collected in this classic ponzi finance go to local land purchases and real estate development. Part of the funds are used in order to pay back the rolling loan. The short term interest rate in this black market is very high and ranges between 20%-150% annual rate. The sources of the ponzi funds are diverse, as ordinary citizens, banks with corrupted bank officials, and state enterprises play the game.

In China’s Shark Loan Ponzi Finance- Understanding China’s Shadow Banking System we also covered the subject of fake real estate contracts:

A larger percentage of China’s real estate sales are in reality fake since they are made with the purpose of obtaining the flow of bank loans before real sales happen. Through this arrangement, the developer and the shark lender make sure that the bank will bear the ultimate risk.
Western investors doubt this criminal activity since they do not understand the true nature of China’s society, or any totalitarian regime for that matter. But China is not a democracy; it is semi communist, semi fascist regime that is running a planned economy.
The reality is that more loan growth can benefit the borrower, the banking executive, and the local government officials. The return of capital and the potential loss of the principal is always a secondary consideration, especially when the loans are issued to the state owned enterprises or well connected “too big to fail” private businesses. Who cares? The banks are state owned banks, and the capital is state capital.

Published an amazing story of former Microsoft China CEO, Jun Tang

He became famous recently due to the exposure of his purchase of a fake PHD diploma from Western Pacific University. He also claimed to have a PHD degree from California Institute of Technology in his Bio and numerous occasions. There is a hot debate on the Chinese web regarding Mr. Tang, who used to be a role model, and is now exposed to be a crook. On the other hand, in the fake goods capital of the world someone line Mr. Tang may as well be a role model.

According to the report, Mr. Tang is under police investigation for an alleged criminal corporation with real estate developers in Suzhou City. The police suspect that they faked a commercial real estate sale contract, which enabled him to receive a 112.8 million Yuan mortgage loan from a bank. Later, the loan has been lent out by the real estate developers and to loan sharks.

Stories about the underground shark loan industry are appearing almost every day on the Chinese press. Cheating the banks and retail investors through fake real estate sales an ponzi scheme appears to be the only way to make money in China.

How many bank loans have found their way to real estate projects through the “Bank trust investment products”? No one really knows exactly the figure, but this country’s banking system one big, closely guarded, black box. The worlds “growth engine” is built upon a giant bubbles supported by lies.