A Taiwanese businessman investing in China was shocked when he found that a 50 million yuan (US$8 million) loan he applied for from the China Construction Bank (CCB) more than a year ago actually went into a unrelated business in China and was used as collateral for another 90 million yuan loan.
The 73-year-old Chen Hsi-so (陳細鎖) said that on the recommendation of a friend, he opened a lime absorbent plant in Wuping District, Longyan, in China’s Fujian Province last year, and applied for a 50 million yuan loan from CCB’s branch in Wuping.
Chen said that it was his first investment project in Fujian, as he had previously only made investments in Zhejiang and Anhui provinces since he started doing business in China in 1989.
Although Chen was told that his loan was approved not long after he sent the application, he never heard back from the bank again, Chen said.
In July, Chen applied for a loan of 17 million yuan from Shanghai-based SPB Bank, and when he made another loan application in August, he was told by SPB Bank that his plant in Wuping had been used by CCB as collateral for a 90 million yuan loan made to a real-estate developer in Xiamen in Fujian Province, for more than a year.
Chen said he was shocked upon hearing the news and immediately contacted CCB.
However, the bank told him it had been “only a small mistake in inserting company code” and the bank’s management even went as far as threatening Chen by saying that if he made a big deal out of it, “your business will not run smoothly here.”
“It’s not a big deal [for us] to borrow documents from your Taiwanese businesses, you lose nothing,” it said.
Chen said he did not believe it had been a small mistake, since he had applied for a substantial loan and the decision to approve it was not in the hands of the CCB’s branch in Wuping.
Only the provincial level of the bank’s management could have made the decision, the businessman said.
Chen said he believed his name was “borrowed” in a series of banking irregularities.
He said the Fujian Provincial Government had promised to do him many favors, including giving him a contract for a 30-year supply of minerals, but none of the promises have been fulfilled so far.
Because he encountered financial difficulties and his Japanese business partner withdrew, Chen has had to suspend operations at his plant. He says that the losses have cost him dearly.