Ordos Real Estate Development Funds Exceed 80% Or From The Private Sector

The scale of private capital beyond imagination has cast Ordos (15.87, -0.17, -1.06%) into a legendary city. There are too many people writing the myth of "money" here.

But some of them have gone to the end.

In September 24, 2011, Wang Fujin, the legal representative of the Limited Liability Company of the Zhongfu real estate development company (hereinafter referred to as Zhongfu), hanged himself in a toilet.

If Wang Fujin did not die, he was faced with a monthly interest rate of 3% and a total of 263 million yuan.

Insiders told reporters that "for many other real estate enterprises in Ordos, they are faced with such a situation (capital chain break), but only a different degree."

Ordos

Since April this year, the news of Wenzhou SMEs' bosses' debts has been running.

Statistics show that nearly half a year has more than 80 company bosses "run away" incident.

The high borrowing pressure and the fragmentation of the capital chain are the main factors that drive these bosses to "go away". But why did Wang Fujin not choose to "run away"?

He went deep into Ordos to investigate local people.

Wang Fujin's loan career also seems to confirm this statement.

Some creditors said publicly that the main source of funds for Wang Fujin was his former colleagues in the court, retired cadres, relatives of the employees in Zhongfu company, and Wang Liubao, one of the founders of Zhongfu company.

Perhaps it is precisely because of the "human relationship" has taken a way of lending, making Wang Fujin unable to pay only to choose "to apologize for death".

"In fact, it also reflects some characteristics of Erdos itself, which are different from other cities -- capital circulation."

Li Huizhong told reporters that in Ordos, the engine of the whole wealth is coal, and real estate is the money pot of wealth, while the middle link is supported by usury.

"It will also happen because the local usury has changed."

Li Huizhong explained that in the past, there were few intermediate links in Ordos usury, which were directly invested in industry or other fields after melting into money, but now the concept of "money frying money" was gradually born.

"I melt money from you, not to invest, but to lend to the next family and use higher interest.

The resulting problem is that the higher the interest rate is, the more unsustainable it is.

For developers, under the influence of policy control environment or sources of funds, it is easy to crash.

Li Huizhong said.

Prudent

The interest rate of private lending is so high. Why are there so many developers and business owners?

In a research report from the Ministry of housing and the Ministry of housing policy and research center and Gao and investment, the report on "China's private capital investment survey" shows that in Ordos, the capital of real estate development mainly comes from private lending rather than traditional banks.

As of the end of February this year, the balance of the real estate development loan of the Ordos bank system is only 5 billion 970 million yuan.

In the investment scale of 36 billion 70 million yuan, only accounted for less than 16.55%.

The Ordos banking industry has been relatively prudent in lending principles for real estate development loans and other industries, mainly because most private capital would prefer to invest in private lending systems rather than banks.

Ordos private financing costs are about 2.5% monthly interest rate, while borrowing costs are generally at monthly interest rate of 3%, the highest or even the highest monthly interest rate of 4%~5%.

"In Erdos, even if he met a taxi driver, his money was put in the underground bank, so the whole city was in such a huge situation of private capital fermentation."

Li Huizhong told reporters.

The Domino effect

For Wang Fujin's death, more people in the industry regard the real estate market as a signal that the capital chain is facing a large area of fracture.

When the new year is approaching, the survival of the real estate enterprises is not optimistic.

On the one hand, investors are cautious and slow in capital recovery. On the other hand, the snowball is getting bigger and bigger. "For many other real estate companies in Ordos, they are faced with such a situation (the capital chain break), but the degree is different."

Li Huizhong expressed this.

"The next chain reaction will be that more and more creditors are worried about starting to collect money and businesses will not be able to get money. There will surely be a large number of enterprises copying this situation, but whether it will cause government intervention depends on whether there will be factors that cause instability in the whole society."

Li Huizhong said.

In his view, a large number of "running tide" in Wenzhou has made the government start to pay attention to the support for SMEs in terms of capital, as well as in Ordos. If this situation spreads, the government will intervene through some policy guidance.