The default of a private financing company in China’s Jiangxi Province has resulted in thousands of investors losing their investments. Despite more than two years of efforts to seek redress, no resolutions have been achieved, with the total financial losses exceeding tens of billions of yuan.
A witness told The Epoch Times that security guards were actively preventing photography at the scene. According to one protester, the affected individuals had invested in products offered by the Nanchang Civil Financing Registration Service Center (NCFRSC) and lost all their money.
One woman at the protest said that she had a small notebook documenting the amounts involved, revealing that some investors were defrauded of hundreds of thousands or even millions of yuan. She said that the NCFRSC was a formally registered entity featured in state media such as Jiangnan Metropolis Daily and publicly endorsed by the mayor of Nangchang. Investors turned to protest at Jiangxi Bank because they were unable to contact NCFRSC’s representatives, she said.
The bank that services the NCFRSC did not respond to The Epoch Times’ request for comment.
Established nine years ago, the NCFRSC faced a large-scale default in May, leaving numerous investors unable to recover their principal and interest. The center has since ceased operations. The default affected over 2,200 investors, involving more than $140 million. Most of the investors were residents of Nanchang, with many between the ages of 60 and 90, and many investing between $140,000 and $280,000.
Additionally, The Epoch Times learned that the Yingtan Private Financing Registration Service Center suspended operations on Jan. 28, 2023, for unspecified reasons, leaving its investors in a similar predicament. Many Private Financing Registration Service Centers across Ji'an City have been inactive for over two years, with recommended investment products failing, leaving investors without recourse.
The Private Financing Registration Service Centers in Jiangxi Province have struggled for some time. These centers, typically established as private non-enterprise units or companies, are intended to provide comprehensive service platforms for local private lending, including fund supply and demand information release, intermediary services, and registration. Regulations stipulate that each county, city, and district can only have one such organization, which operates with strong local government support to register and publish private fund supply and demand information, match private funds, and record financing and lending contracts.
Li Hua (a pseudonym), an investor from the Jizhou District of Ji'an, who invested tens of thousands of yuan several years ago, expressed deep frustration over the collapse of a local private financing platform. She shared with The Epoch Times that government-organized events, complete with gongs and drums, and endorsements from city leaders convinced her to invest. The platform, heavily promoted by state media and television, was believed to be legitimate. Li never anticipated that she would lose her entire investment.
According to a contract provided by Li, titled “Jizhou District of Ji’An Folk Financing Registration Service Co. Ltd. Private Fund Lending Contract,” the agreement involves several parties: the lender (Party A), the borrower (Party B, a company in Jishui County), the mortgage provider (Party C, a real estate company in Jishui County), and the intermediary/mortgagee (Party D, Jizhou District Folk Financing Registration Service Co. Ltd.).
The contract stipulates that Party B, introduced by Party D, borrows private funds from Party A, who transfers the loan to Party B’s designated supervised account. Party C provides collateral for Party B’s loan. The regulations require that Party A authorizes the intermediary (Party D) and mortgage provider (Party C) to jointly supervise Party B’s use of the funds and monitor its repayment capacity. Party B is obligated to provide information on business operations upon request. In the event of a default, all three parties authorize Party D to designate a fourth party as the transferee of the loan contract’s creditor’s rights.
Given the contract terms, one would expect that issues with the intermediary should not affect the transactions between the lender and borrower. However, suspending the Private Financing Registration platform, which functioned as the intermediary, has disrupted the normal operation of these private lending projects.
Another victim, Qin Yang (pseudonym) from Jizhou District, reported that borrowers exploited the platform for fraudulent project financing through shell companies, often involving family members and colluding with corrupt officials to defraud ordinary citizens, particularly the elderly.
Li revealed that private financing in Jizhou District began in 2015. By January 2021, local authorities had identified issues and reported them to the Ji'an City government. The city adopted a strategy of internal strictness and external leniency, sealed the news to the public, while reportedly allowing company bosses to gradually withdraw and report their financial status quarterly to the municipal finance bureau. However, Li said that this did not occur; instead, the authorities helped the company bosses transfer assets over 15 months. The government later declared these individuals as defaulters with no assets. The full-scale default happened in May 2022.
Li said that investors have been seeking justice for two years with no success, leading to some investors being arrested and sentenced. The authorities have classified the case as illegal fundraising. Following the default, the local government organized a campaign against questionable fundraising, during which some participants vandalized the event site.
Li said that 139 individuals, after receiving insider information, withdrew their loans before the Jizhou District Folk Financing Registration Center’s default. Among these people were some county-level Chinese Communist Party officials who had endorsed the center. She suspects that some officials may have benefited from these transactions.
“Ordinary people suffer the most from this crisis,” Li said.
“Not only have we lost faith in the government, but even civil servants no longer trust the government. They are afraid to speak out due to their positions. Now, no one believes in what the government says, including financial innovations. The government has lost its credibility.”
According to documents provided by Li to The Epoch Times, 634 people in Jizhou District were affected, with a total loan amount of 239.72 million yuan (about $33 million). Among them, 359 were retirees, accounting for 66 percent. There were 86 victims over 70 years old, making up 16 percent of the total number of victims. In addition, hundreds of victims from Jinggangshan City were involved, with a total loan amount of 190 million yuan (about $26 million).
Li estimated that across Ji'an City, there are likely 2,000 to 3,000 victims. Some investments were made under individual names but involved entire extended families, with the total amount exceeding 1 billion yuan ($139 million).
The Jiangxi Provincial Government and the Ji'an City Finance Bureau did not respond to a request for further information.
