According to Chinese media reports, Xin Qi sold wealth management products to individual investors, with the investments put into commercial and residential development in second-tier cities. Investors were promised annual interest rates as high as 15.6%, according to the company’s official website, which now appears to have been shut down.
The asset management firm would buy properties under development from the developers at a discount, and then transfer ownership to retail investors. Investors would be repaid with their capital and earnings after the project was finished and the developer either bought back the properties or they were sold.
The scheme hinged on China’s booming property market, which has slowed considerably in recent years.
According to sources, after investors failed to receive payments from the company on Sunday (14 Feb), Xin Qi Asset held a meeting in Shanghai on Wednesday to discuss solutions with its investors.
Pictures circulating Chinese media show on Friday the front door of the company locked, with what appears to be a bicycle lock.
A letter to investors from Xin Qi chairman Jia Qi pinned to the locked glass doors reportedly asks investors not to give up but advised that the company has stopped making payments to customers.
Earlier infrmation from the company advised that assets under management stood at around CNY4bn. It is unknown at this juncture whether other assets managed by Xin Qi are effected.
Shanghai police are understood to be investigating the company.
Ezubao Ponzi scheme
The Xin Qi Asset scandal is the second to hit the Chinese property lending sector this month, following the Ezubao scandal that resulted in 21 arrests and the loss of CNY50bn from hundreds of thousands of investors.
More than 95% of the development projects advertised as funded by Ezubao were found to be fake.