Angry Chinese: Investment loss due to supervision failure

Angry Chinese: Investment loss due to supervision failure. April. 14, 2016 07:22. by 이세형기자 turtle@donga.com.

"The government neglected risky investment. The government did not properly supervise distressed asset managers and remained idle."

The Wall Street Journal (WSJ) reported on Tuesday that small investors who trusted asset managers with their money and had financial damage are protesting in groups for reimbursement and improved supervision.

According to the WSJ, "mom and dad investors" who hired asset managers for school tuition and retirement savings and then lost their money are protesting across China. They are protesting mostly in front of government buildings and holding the government responsible. They were tempted by high interest earnings that their asset managers promised and did not think about the risks, resulting in the loss of their money.

The asset managers responsible gathered money from small investors by promising them a 15 to 18 percent profit but lost out on high-risk investments. Chinese banks' deposit interest in 1.5 percent on average, not good enough for investment. Asset managers constantly put advertisements on national broadcast and displayed their influence by inviting government authorities to their company's foundation anniversary event.

Char Kway Jun (42) trusted "Teng Fei" with his family's money, 200,000 dollars and lost it all. Teng Fei collected 400 million dollars from 37,000 investors and went bankrupt in 2014. He explained, "A number of local government high-ranking officials and the party members attended the anniversary ceremony of the company. By watching this, many investors thought that Teng Fei was a stable company and if something happened to the company, the government would give aid."

In China, the amount of money that asset managers were unable to return to investors was a total of 2.8 trillion dollars in the first half of last year. However, the Chinese government is not able to take countermeasures and is failing to grasp the accurate amount of money that the investors lost.

Teng Fei was actually a loan shark who would lend money with a high interest rate to small local companies that have a low credit rating and are ineligible for bank loans. The investors became furious when they found that the government gave such a company approval to do business as an asset manager, but it was too late.