Lured by the promise of yields approaching 12pc, gifts such as Dyson air purifiers and Gucci bags, and the guarantee of China’s top-selling developer, tens of thousands of investors bought wealth management products through China Evergrande Group.
ow, many fear they may never get their investments back after the cash-strapped property developer recently stopped repaying some investors and set off global alarm bells over its massive debt.
Some have been protesting at Evergrande offices, refusing to accept the company’s plan to provide payment with discounted apartments, offices, stores and parking units, which it began to implement on Saturday.
“I trusted Evergrande for being a Fortune Global 500 company,” said the owner of an Evergrande property in the conglomerate’s home province of Guangdong.
“It’s immoral of Evergrande not to pay my hard-earned money back,” said the investor, who had put 650,000 yuan (€85,765) into Evergrande wealth management products (WMPs) last year at an interest rate of more than 7pc.
More than 80,000 people – including employees, their families and friends as well as owners of Evergrande properties – bought WMPs that raised more than 100bn yuan in the past five years, said a sales manager of Evergrande Wealth, launched in 2016 as a peer-to-peer (P2P) online lending platform that originally was used to fund its property projects.
Around 40bn yuan of the investments are outstanding, said the sales manager.
China Evergrande did not respond to a request for comment yesterday, which was a public holiday in China.
With more than $300bn in debt, Evergrande’s liquidity crisis has rattled global markets. The company has vowed to repay WMP investors.
China’s years-long effort to deleverage its economy has pushed companies to resort to off-balance sheet investments in search of funding.
After Beijing further capped debt levels of property developers last year, the most indebted players like Evergrande felt further pressure to find new sources of capital to ease mounting liquidity stress, turning to employees, suppliers and clients for cash through commercial paper, trust and wealth management products.
Evergrande Wealth started to sell WMPs to individuals in 2019 after a regulatory crackdown led to a collapse of the P2P lending sector, said the sales manager.
To attract investors, the sales manager offered gifts such as Dyson air purifiers and Gucci handbags to each person who bought more than 3m yuan of WMPs during a Christmas promotion last year.
A product leaflet seen by Reuters showed the WMPs are categorised as fixed-income products suitable for “conservative investors seeking steady returns”.
In two products sold last year, a construction company in Qingdao sought to raise up to 10m yuan with annualised yield of 7pc in one and 20m yuan with yields of 7.8pc to 9.5pc in another. Minimum investments were 100,000 and 300,000 yuan, respectively.
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