By Hu Xiaocen | 2012-6-18 | NEWSPAPER EDITION
HUANG Jian, chairman of the once-lauded Hongchang Leather Co, used the business for private financing and fled with more than 1 billion yuan (US$158 million) in debt, CCTV reported yesterday.
Hongchang Leather produced leather for high-end furniture and bags. The factory is in Haining City, Zhejiang Province, dubbed the "leather capital of China," and was once a star manufacturer with honorary titles and awards.
The company is now being liquidated, with all equipment sealed up. Huang left the country with no prior notice in early May, leaving bank creditors at a loss.
The city's economic development director, Zhang Yueming, said the lenders were the first to notice Huang's absence. The company owes US$200,000 to the Bank of China and 10.3 million yuan to the Bank of Beijing. Another of the country's "big four" banks, China Construction Bank also was involved. Total debt amounted more than 1 billion yuan.
The case has raised questions about loans extended to Hongchang. The workers who lost their jobs at the factory said the banks should not have lent 1 billion yuan to a company that sells only a third of that amount in a year. In fact, 80 million yuan of cash would be enough for daily operations, according to a chartered accountant familiar with the case, Liu Chengxiong.
The investigators were not clear on where the money went - the corporate bank account of Hongchang and personal accounts of Huang were all empty - but they suspect Huang may have invested some of the money in real estate. Six properties in Shanghai worth over 270 million yuan are under his name. And he owns properties in other cities as well.
"There have been a few private entrepreneurs like Huang who borrowed money from the banks to invest in the property market for short-term profits," said Wang Song, professor at the Financial Research Institute of the Chinese Academy of Social Sciences in a posting on his Weibo microblog. "They ran away if the investment turned out bad. It's hooliganism that was typical of China's early market economy."