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Ghana’s Crackdown on Chinese Gold Miners Hits One Rural Area Hard

June 29, 2013 by Leave a Comment

For nearly a decade, thousands of peasants from this rural speck in southern China’s Guangxi Autonomous Region borrowed heavily before boarding flights for Ghana, Africa’s second-largest gold producer, with glinting ambitions and no backup plan.

The Chinese found their gold, though trouble soon found them, in the form of crooked police officers and armed bandits who prowled the mining camps. Then, this month, the Ghanaian authorities declared the mines illegal and arrested more than 200 Chinese miners, accusing them of polluting the land and abusing local workers. Countless others fled as local residents armed with guns and machetes attacked the camps, robbing miners of their possessions and killing some who fought back.

After the crackdown, images of violent deaths and vandalized mining camps blazed across Chinese social media, fueling national anger and soul searching. But here in Shanglin, a mountainous county of 470,000 in one of China’s poorest regions, it is despair over financial ruin that is most pronounced.

“My son might be killed in Ghana, but if he comes back he’s dead anyway,” said Shen Aiquan, 65, whose family borrowed 3 million renminbi, or $489,000, to build a mining operation, though from whom exactly she did not know. All she could do was wait for her son, and the debt collectors who would surely follow.

The crisis in Ghana has revealed the perils of a high-stakes economic gamble, in which countless people have taken part in overseas investment projects endorsed by the Chinese government but have been left to fend for themselves when things go wrong.

Some of the problems facing residents here stem from the informal lending practices common among the rural poor. Lacking the hard assets banks usually require, many people leverage “guanxi” — the social collateral binding business and personal relationships in China — to secure loans from relatives and friends.

Based on trust and often little else, guanxi financing has devastated the villages and townships of Shanglin, whose residents are now bound not just by blood and sweat but by bankruptcy as well.

And the trust is sometimes misplaced. Early this month, a Chinese man in Ghana disappeared with millions of dollars that miners had given him to wire home. Ms. Shen’s son was one of the victims. Another was one of her neighbors, Yang Baofa, 52, who returned from Ghana two weeks ago with barely enough money to travel to his village. “We trusted him because he was Chinese,” he said of the missing man.

On the day Mr. Yang arrived, several of the men who had accompanied him back to China were stuck in the southern city of Guangzhou working construction jobs to earn the $40 needed to buy a long-distance bus ticket home.

The miners who have been trickling back to Shanglin since the violence began insist that they broke no Ghanaian laws. Taking a break from playing basketball across from his concrete house, Wu Jian, 34, a former mine owner, said he had made sure to get all the necessary paperwork in Ghana, including land deeds and a mining license. “The local people said as long as we had money we could do anything we want,” he said.

Last month, he fled, leaving behind an operation that he said was worth about $326,000. The money, he said glumly, was borrowed from friends, relatives and loan sharks.

“I went there because that’s what everyone else did,” he said. Despite his debts, he had no regrets about leaving Ghana. “Coming back wasn’t the right decision; it was the only option.”

Shanglin’s connection to the African gold mining project is widespread. “Everyone has a relative or friend in Ghana,” said Lan Xiongwen, 45, as he slurped some fish stew at a restaurant in the county seat.

When relatives took his son to the Ghanaian mines two years ago, Mr. Lan’s family invested $489,000 in excavating machines, paid for by plundering savings and getting bank loans. Back then it seemed like a smart move. With 980 tons of gold being exported to Shanglin annually, he said, residents figured it would be only a matter of time before they realized their dream: after paying off the loans, they would build a house and buy a car.

Mia Li contributed research.

Article source: http://www.nytimes.com/2013/06/30/world/asia/ghanas-crackdown-on-chinese-gold-miners-hits-one-rural-area-hard.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Underground Lender Gets Death Sentence in China

May 20, 2013 by Leave a Comment

BEIJING — A businesswoman in southern China has been sentenced to death on charges of defrauding investors as the government tightens controls on informal financing that is widely used by entrepreneurs.

The woman, Lin Haiyan, was convicted of “illegal fundraising” for collecting 640 million renminbi, or $100 million, from investors by promising high returns and low risk, according to a statement by the Intermediate People’s Court of Wenzhou. It said that the plan had collapsed in October 2011 and that 428 million renminbi could not be recovered.

The case highlighted potential abuses in the largely unregulated informal lending that supports entrepreneurs who generate China’s new jobs and wealth but often cannot get loans from the state-owned banking industry. The government is tightening controls after a surge of defaults following the global financial crisis set off protests by lenders.

Another businesswoman from Wenzhou was also sentenced to death last year on charges of illegal fund-raising. That penalty was overturned following an outcry on the Internet and she was sentenced to prison.

Communist leaders have promised more bank lending for entrepreneurs and announced a pilot project in 2012 in Wenzhou to allow closely supervised private sector lending. But business leaders in Wenzhou say it is harder for entrepreneurs to get loans because worsening economic conditions have made banks and private sources reluctant to lend.

The underground credit market is estimated by China’s central bank and private sector analysts at 2 trillion to 4 trillion renminbi, or as much as 7 percent of total lending. In some areas, informal lending exceeds that of official banks.

Many households provide money for private lending in an effort to get a better return than the low deposit rates paid by Chinese banks, which effectively force depositors to subsidize low-interest loans to state industry.

The authorities have sentenced 1,449 people to prison terms of at least five years for involvement in underground lending since 2011, a police official, Du Jinfu, said last month.

Legal experts say loans between individuals are legal and that the government has failed to make clear what lenders and borrowers are allowed to do.

“The distinction between illegal fund-raising and private lending still remains unclear,” the Dui Hua Foundation, a group based in San Francisco that researches China’s justice system, said in a report in February.

Ms. Lin started raising money from friends, relatives and co-workers in 2007, according to a statement on the court’s Web site. It said Ms. Lin had told investors the money was going into stock offerings and bank deposits but used it to speculate in stocks.

Even as losses mounted, Ms. Lin continued to raise money until the scheme collapsed, the court said.

The statement said the penalty still must be confirmed. All death sentences in China are automatically appealed to the country’s highest court for review.

The court took the unusual step of issuing a second statement to support sentencing Ms. Lin to death after a Chinese blogger questioned the penalty in a comment that included the phrase “killing the witness.”

“Lin Haiyan’s actions constituted financial fraud that caused huge losses and seriously damaged the people and the state,” said the statement, which was several times the length of the original announcement. It criticized the blogger for challenging the court’s decision.

Protests erupted in 2011 and early 2012 in cities and towns throughout central China and along the southeast coast, areas with large concentrations of small private businesses, after the slowdown in global trade set off a wave of defaults. Schoolteachers, retirees and others who had lent to entrepreneurs demanded the authorities get back their money.

Regulators also worried that banks and state companies had gotten involved in underground lending, exposing the official financial system to unreported risks.

In the earlier case in Wenzhou, an entrepreneur, Wu Ying, was sentenced to death for improperly raising 770 million renminbi from investors in 2005-7. Ms. Wu, who started with a hair salon and built a business empire, had earlier been praised by the state news media as a role model for female entrepreneurs.

The Chinese Supreme Court overturned Ms. Wu’s death sentence following an outcry on the Internet over the severity of the penalty. She was resentenced to death with a two-year reprieve, which usually is commuted to a long prison term.

A statement on the Web site of China’s highest court, dated in 2011, says charges of “illegal fundraising” can be applied to an individual who receives more than 200,000 renminbi of informal loans or causes losses to lenders of 100,000 renminbi. Enterprises can face charges if they receive 1 million renminbi or cause losses of 2.5 million renminbi.

Article source: http://www.nytimes.com/2013/05/21/business/global/underground-lender-gets-death-sentence-in-china.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Chinese Newspaper, Southern Weekend, Challenges Censors

January 6, 2013 by Leave a Comment

The unrest at the influential newspaper Southern Weekend began last week when censors appeared to have toned down the paper’s New Year’s letter to readers — traditionally a call for progress in the new year. That caused journalists and their supporters — including students at nearby Sun Yat-sen University — to issue open letters expressing their outrage.

“Our yielding and our silence has not brought a return of our freedom,” the students said in their petition on Sunday, according to a translation by Hong Kong University’s China Media Project. “Quite the opposite, it has brought the untempered intrusion and infiltration of rights by power.”

By Sunday night, the protests had transformed into a real-time melee in the blogosphere — a remarkable development in a country where protests of all kinds are tightly controlled and the media largely know the boundaries of permissible debate.

In this case, the newspaper’s economics and environmental news staffs appeared to declare that they were on strike, while editors loyal to the government shut down or took control of the paper’s official microblogs. One widely distributed staff declaration with 90 signatures said the publication’s microblogs were no longer authentic.

“I don’t know whether it will be a full strike, but I do know the joint statement about the confiscation of the Weibo account has widespread support,” said one former editor, referring to a microblogging site and speaking on the condition of anonymity.

The turmoil at the Guangzhou-based newspaper resonates especially strongly among politically aware Chinese because Mr. Xi chose southern China for a tour after taking power in November. He made a pilgrimage to nearby Shenzhen, where the father of China’s economic reforms, Deng Xiaoping, kick-started them two decades ago.

Indeed, Mr. Xi seems to be casting himself in the mold of Deng, who was known for bold economic reforms but who also brooked no opposition to the rule of the Communist Party.

The latest indication was a speech Mr. Xi made that also was published in newspapers on Sunday. Speaking to senior leaders, Mr. Xi repeatedly invoked Deng, especially on the need to adhere to “socialism with Chinese characteristics,” a phrase often used to mean a combination of pragmatic policies and one-party rule. He also praised the pre-reform era, in what appeared to be an effort to appeal to harder-line Communists.

But part of the reason for the clamor for reforms are hopes that Mr. Xi himself has raised. So far he has won praise by calling for China’s constitutional protections to be put in effect, ordering officials to cut pomp and setting in motion an anticorruption campaign.

These actions seem to have prompted the calls for even bolder reforms.

Beyond the unrest at Southern Weekend, editors of the edgy historical journal Yanhuang Chunqiu published a cover article last week arguing that the existing Constitution offered a basis for political reform and that the party’s failure to abide by it was a central cause of political instability. On Friday, the magazine’s Web site was shut down, with officials claiming that it had failed to update its registration.

A message posted by the journal about the shutdown was forwarded 31,000 times, provoking many scathing criticisms of the government. The chief editor, Wu Si, said the journal’s staff had filed the paperwork and could be back online in 10 days.

Optimists say they hope the measures against the two publications were the result of recalcitrant officials appointed by the departing team of Hu Jintao and Wen Jiabao, whose decade in power was marked by an overriding desire for stability. Many members of Mr. Xi’s team will not take office until the annual meeting of the National People’s Congress in March, and it could take years for Mr. Xi to put allies into important positions of power.

“If Xi does not remove people and promote some officials, his new policies — if he has any — will be sunk by the old people,” said a senior editor at a top party newspaper who asked to remain anonymous because of the delicacy of the subject. “The conflicts between the old and the new have just emerged.”

Chinese politics since Deng’s time have been defined by similar tensions between liberalization and reaction. But Mr. Xi also confronts millions of increasingly outspoken Internet users whose outpourings can confound even China’s heavy censorship.

Zhan Jiang, a professor of media at the Beijing Foreign Studies University, said the public anger showed how expectations had risen. “Currently in China people are unusually sensitive to developments like this, and so the reaction has been quite intense,” Mr. Zhan said.

Some are less sure that the atmosphere is more open, saying the media shutdowns have occurred because Mr. Xi has avoided taking a clear position.

“There are still no clear rules on the media, and so officials stick to using their habitual ways to control the media,” said Li Datong, a prominent Chinese newspaper editor fired for his views. “There won’t be any change until Xi Jinping enunciates any ideas about major change.”

Other commentators doubt this will happen. They note that in previous jobs Mr. Xi upheld the status quo and that now that he has reached the pinnacle of his career he is unlikely to support systemic reform.

“This is a traditional viewpoint: if you change the emperor you’ll have a change of policy and maybe some new, hopeful things,” said the exiled Chinese political commentator Zhang Ping, who goes by the pen name Chang Ping. “But I don’t think this is likely, because you still have an emperor.”

Jonathan Ansfield contributed reporting from Beijing, and Chris Buckley from Hong Kong.

Article source: http://www.nytimes.com/2013/01/07/world/asia/chinese-newspaper-challenges-the-censors.html?partner=rss&emc=rss

Filed Under: Media Business Tagged With: , ,

China Is Said to Consider Plan to Deal With Failed Banks

December 14, 2012 by Leave a Comment

A consensus has formed among China’s leaders that the country needs a formal system of bank deposit insurance as banks have rapidly ramped up lending and begun offering a wide variety of increasingly risky investment products that do not appear on their balance sheets, the official and advisers said.

Introducing deposit insurance could also help the government steer the financial system toward providing more credit for small and medium-size private enterprises. These now receive as little as 3 percent of bank lending even as they account for at least half the country’s economic activity.

Without a clear system until now for closing banks that lend unwisely, banks have been encouraged by regulators to lend overwhelmingly to state-owned enterprises that appear certain to repay loans. That has left smaller businesses and private companies starved for credit.

The first public indication of the government’s intense interest in deposit insurance is likely to come at the Central Economic Work Conference this month, said the official, who discussed internal government matters only on the condition of anonymity. Held each December since 1994, the conference is the most important economic policy-making event in the Chinese calendar and sets the agenda for the coming year.

This month’s conference, the exact dates of which are still secret but which could start as soon as this weekend, is being watched with particular scrutiny by economists and investors as a clue to the agenda for the next decade of Xi Jinping, the new general secretary of the Communist Party. The conference is jointly overseen by the cabinet and by the Central Committee of the Communist Party.

Mr. Xi startled many analysts by rushing down to Shenzhen in southern China last weekend for an inspection tour of the city, known within China for its embrace of free-market capitalism. He is following in the footsteps of Deng Xiaoping, who restarted China’s economic liberalization after the Tiananmen Square crackdown in 1989 with a trip three years later to the same city.

Until now, the government has quietly paid off all depositors in full, regardless of the size of their deposits, when small banks and rural cooperatives have failed; no large banks have been allowed to fail. The government’s fear has been that allowing any depositors to sustain losses, even at the worst-run institutions, would undermine confidence in the financial system.

China’s banking industry is divided on the need for deposit insurance. As in other countries, including the United States, the biggest banks are the least enthusiastic. With a little more than half the country’s deposits, China’s Big Four banks are widely viewed as much too big to fail but are likely to owe hefty premiums for the deposit insurance plan being developed.

“The debate over the deposit insurance scheme is that the larger banks that would contribute more feel as though they would be subsidizing smaller banks,” said Andrew Sheng, a former head of Hong Kong’s securities regulator who for the last 10 years has been the convener of the international advisory council of the China Banking Regulatory Commission.

China’s current five-year plan calls for the government to study deposit insurance, but not necessarily to adopt it. Mr. Sheng expressed surprise when told that the subject was likely to be on the agenda of the Central Economic Work Conference and said that “it means that they are taking it more seriously.”

But Mr. Sheng cautioned that even once the leadership approves the concept of deposit insurance, it could take a full year just to draft the necessary legislation.

Article source: http://www.nytimes.com/2012/12/14/business/global/china-is-said-to-consider-plan-to-deal-with-failed-banks.html?partner=rss&emc=rss

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DaVinci, a Chinese Retailer, Calls TV Accusations Distorted

January 3, 2012 by Leave a Comment

SHANGHAI — Last July, China’s biggest state-run television broadcaster accused a luxury retailer named DaVinci Furniture of passing off low-quality goods from a factory in southern China as premium imports from Italy and other foreign lands.

Now, DaVinci has pointed the cameras and microphones back at the broadcaster, according to a report in current issue of the weekly magazine Caixin. The magazine is regarded as one of the most authoritative business publications in mainland China.

DaVinci says that it has video and audio evidence that the big state broadcaster, China Central Television, known as CCTV, distorted and even fabricated evidence against DaVinci, and that people close to the television program might have tried to extort money from the company.

The CCTV broadcast in July, on the program “Weekly Report on Product Quality,” turned into a public relations fiasco for DaVinci, which was founded in Singapore and had established itself in China as a leading retailer of European brands like Versace and Fendi Casa.

It was also a coup for CCTV, which demonstrated that the official propaganda arm of the Communist Party could also engage in muckraking journalism using hidden cameras.

But according to Caixin, Doris Phua, DaVinci’s chief executive, said that after the initial television allegations against DaVinci last July, she had agreed to wire about $150,000 to the Hong Kong bank account of a middleman whom she said she understood to be acting on behalf of the CCTV journalist involved in the investigative program.

Ms. Phua said the payment had been intended to stop the state broadcaster from continuing to accuse DaVinci, Caixin reported. She also said that the middleman once asked her to pay the CCTV journalist directly. DaVinci said it had reported the incidents to the Chinese police, CCTV executives and the State Administration of Radio, Film and Television, which regulates the industry.

In audiotapes released on the Web site of Caixin, the person DaVinci contends is the middleman is heard discussing a payment with Ms. Phua by telephone, saying: “Originally, I told you to give it to him directly; you were not willing to do so, so it is an understood thing, right? You did it through me, then it’s nothing to do with him. No one would admit this problem.”

Raymond Wong, executive director of DaVinci, said Tuesday that Ms. Phua had met repeatedly with the middleman and the CCTV journalist, Li Wenxue, after the initial report in July, and that she had been pressured into wiring the $150,000 under threat that more harm would come to the company.

“They were telling us they had much more evidence, and will continue to publish and let our company collapse,” Mr. Wong said. “They have the power to tell the public things, even if they are not true, and so we thought we should pay the money first.”

He said the company believed that the journalist, Mr. Li, was probably acting for his own gain.

Shortly after the Caixin article appeared online and in print Monday, Mr. Li issued a statement calling DaVinci’s allegations “slander.”

A spokesman for CCTV, which is based in Beijing, did not return telephone calls requesting comment Tuesday. The man identified as the middleman also could not be reached for comment.

DaVinci is still feeling the effects of the broadcast and has reported a sharp decline in sales in China. The company has also faced sanctions from regulators and customs officials in Shanghai, who have accused it of falsely labeling items and selling poor-quality products.

The Caixin article, though, has at least temporarily shifted the public focus to the question of whether the news division of China’s biggest state broadcaster might itself have been at fault.

Although mainland Chinese media outlets are obliged to comply with the nation’s strict censorship controls, there have been widespread reports over the years about news outlets engaging in extortion by promising to scrap negative articles in exchange for large cash payments. Many news outlets are also widely believed to accept payments in exchange for favorable coverage.

In some cases, journalists in China — or people pretending to be journalists — have reportedly tried to extort money from coal mine bosses in exchange for not publicizing explosions at illegal mines. The payments are apparently made to cover up the cases, because the Chinese government often takes swift action against the operators of such mines.

Article source: http://feeds.nytimes.com/click.phdo?i=38dfc6ae63a4988352d137611b5c00c1

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