The ‘Bo Xilai economy’ is under strain, and not just in Chongqing, the municipality he ran until recently. Bo’s connections to Dalian and its companies are also being probed.
In WiC145 we described how businessman Xu Ming was detained for ‘economic crimes’ on the same day as Bo’s removal as Chongqing’s Party boss. His connections to the Bo family were widely reported to be the reason for his arrest. Since then speculation has mounted about the financial soundness of Xu’s conglomerate, Dalian Shide.
The 21CN Business Herald published an in-depth investigation of Shide last Friday, claiming to have obtained internal company documents. 21CN said that the firm – which straddles six industries and even owns Dalian’s football team – has run up Rmb10 billion of debt to 38 different banks. Anxious bankers are now rumoured to be calling in many of these loans.
On Saturday this led Shide’s management to take the unorthodox step of releasing a “solemn statement” about the group’s financial situation.
It began: “Some news media’s negative reports about Shide Group have caused a great impact to the company’s normal production and operations; in particular reports deliberately distorted by the media that ‘Shide has started bankruptcy proceedings’ have aroused a great deal of confusion and caused significant damage to our company.”
Shide then refuted this, saying it was working with the Party and government organisations on “positive measures” and that the “Shide Group as a whole was still in the normal conduct of all of its businesses”.
The statement added that Shide was perfectly capable of solving the “various problems facing us” (presumably including the detention of its boss) and warned against the spreading of rumours online and in the media.
But it seems unlikely that speculation about Shide will ebb away soon. There is a growing sense that the sprawling firm may have secured access to loans on account of its founder’s connections to Bo. Now it no longer enjoys that advantage; quite the reverse, in fact.
If true, Shide will serve as another example – much like that of Shandong Helon (see page 8) – that political patronage has led to vast misallocations of loans within the Chinese banking system.
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