By Jing Tian (景天)
Issue 623, June 10, 2013
Banking, Page 20
Translated by Wong Siu Tan
Original article: [Chinese]

Xu Cailiang (许才良), owner of Rong Tai Oil Technology Ltd. (融泰石油科技股份有限公司), fled to the U.S. last month leaving behind 800 million yuan in debt.

A source at the local financing office said that the company was founded in 2007 in Jiangyin (江阴), Jiangsu and has been losing money ever since. It’s been able to receive loans from banks because of its close relationship with Jiangyin City Construction and Comprehensive Development Ltd. (江阴市城镇建设综合开发有限公司), also known as City Constriction.

“The owner of Rong Tai and the owner of City Constriction are the same person: Xu Cailiang,” the source said.

The state-run City Construction was founded in 1984 and Xu became its CEO in 1998. Then in 2007, he bought it for 20 million yuan in cash and became the company’s sole shareholder.

Xu was also a supervisor in Jiangyin Agricultural Bank, one of Rong Tai’s investors. City Construction provided 470 million yuan to Rong Tai as a loan guarantee on top of a 3.2 million yuan deposit and a mortgage guarantee allegedly worth 763 million yuan. However, according to a source in a local bank, the mortgage written in the loan application was much higher than the actual value.

Two similar cases have happened in Jiangyin within the past six months. A local official said that the economic environment of Jiangsu is much less transparent than that of its neighbor, Zhejiang, making problems like these less likely to be discovered before it’s too late. Jiangyin, a town with 34 public corporations, has been held up as a model for economic development in recent years. However, it’s likely that the city’s economy isn’t as healthy as it appears on the surface.