Using Hyundai’s name, company wins subsidies, never finishes projects

Source:Global Times Published: 2017/3/29 19:13:39

Imposter cheats Hebei city

In 2009, a South Korean company posing as a subsidiary of Hyundai Group signed a cooperation agreement with local authorities in Handan, North China's Hebei Province. The company — Hyundai RNC Construction Co — bought at least 1,846 mu (123 hectares) of land in the city and over the next seven years received 610 million yuan ($88.69 million) in government subsidies for projects it never completed, according to domestic media reports. A Beijing-based company Onechain Group appears to have close ties with Hyundai RNC, given some overlap in management, Guangdong-based newspaper Southern Weekly reported in March. Onechain's capital grew by 400 times over the past few years to roughly 20 billion yuan in 2017. Early in 2015, the company's chairman, also the debtor of the Hyundai project in Handan, has reportedly absconded from creditors.

The unfinished Hyundai International Automobile City in Handan, North China's Hebei Province, in February Photo: CFP

A construction company posing as a subsidiary of the South Korean conglomerate Hyundai Group won 610 million yuan ($88.69 million) in local government subsidies for six real estate projects it never completed in a northern Chinese city, domestic media reported.

In 2009, a South Korean company named Hyundai RNC Construction Co signed a cooperation agreement with the local government of Handan, North China's Hebei Province, the Beijing-based newspaper China Real Estate Business reported on February 26.

The newspaper uncovered the deception in February when it discovered that Hyundai RNC had not completed construction on the Hyundai international automobile city project and six residential projects, even though homes had already been sold at several of the developments.

In addition, several authoritative institutions confirmed in February that Hyundai RNC Construction Co has no connection with South Korean company Hyundai Group.

Following the report, the Handan local government announced it would investigate the case, according to a post on its Internet information office's WeChat account on March 2.

The power of name

In June 2009, the Handan city government signed an agreement with Hyundai RNC Construction Co to build a project called Hyundai International Automobile City, according to the local government's WeChat account.

An exhibition plaque next the unfinished project says that it consists of five parts, including the Hyundai international automobile exhibition center and the Hyundai international five-star hotel, according to a report in Southern Weekly on March 23. The plaque touted Hyundai Group's involvement, noting that the $1 billion project was the largest investment the Handan government had ever brought in.

Besides the automobile city project, Hyundai RNC also developed six residential communities including Hyundai Fuyangyuanzhu, Hyundai Aocheng and Hyundai Haitangwan, according to the industry portal

Handan resident Liu Jinghua bought a home in one of the communities in November 2012, Southern Weekly reported. The developer said that buyers would be able to take ownership of the properties at the end of 2014, but some of the buildings were never finished.

"Apartments in three buildings in the Hyundai Haitangwan residential community were never transferred to home-buyers," Liu told Southern Weekly.

Also, none of the homes in the Hyundai Fuyangyuanzhu community were ever transferred to homeowners.

Liu noted that some buyers took ownership of their homes only to find they were equipped with temporary water and electricity, according to the report.

The Hyundai international automobile city and the residential communities covered a total area of 1,846 mu (123 hectares) and the land was worth at least 5.3 billion yuan, Southern Weekly reported.

As a key foreign investment project, the Hyundai international automobile city received strong support from local government, including government subsidies of 610 million yuan, according to the China Real Estate Business report in February.

However, with the projects unfinished, Hyundai RNC also owes money to trust companies, construction enterprises and home-buyers, with the total amount in the billions of yuan, the report said.

Not that Hyundai

In government documents, promotional materials and media reports, the foreign company behind the defunct projects is referred to as either Hyundai Group or its subsidiary, Hyundai ENC Construction Co, Southern Weekly reported.

However, Hyundai RNC Construction Co was "mistranslated" as Hyundai ENC Construction Co in the agreement signed with the Handan local government, according to domestic media reports. Hyundai RNC is a real South Korea-registered company, though it has no connection with the conglomerate Hyundai Group.

Hyundai Group only has one construction subsidiary in China, the Hyundai Engineering and Construction Co, which does not have any projects in Handan, Southern Weekly reported.

Still, the similarity in names between Hyundai ENC and Hyundai Engineering & Construction Co gave Handan government confidence that it was working with the actual South Korean conglomerate, according to the China Real Estate Business report.

Furthermore, when Handan government officials were doing their due diligence investigation of Hyundai RNC in April 2009, they met with company representatives at Hyundai Group's headquarters, the China Real Estate Business report said. This left officials with little doubt that they were not working with Hyundai Group.

Connections at home

In fact, Hyundai RNC has close ties with a Beijing-based corporation called Onechain Group, which also has a number of investment projects across the country.

A woman named Tang Liping has donated money to Project Hope, granted public subsidies to students and attended commercial activities in Shenzhen, South China's Guangdong Province, while using the title "general manager" of Hyundai RNC, Southern Weekly reported.

However, when the vice mayor of Panjin city, Northeast China's Liaoning Province, visited Onechain Group in August 2014, Tang received the Liaoning official under the title of vice president of Onechain, according to a statement on Onechain's website in August 2014.

In addition to management overlap, some of Hyundai RNC's projects seem to have been carried out by Onechain, Southern Weekly reported. For example, Onechain has stated that it is one of the investors in an international automobile city project in Handan, according to an introduction on its website.

Onechain chairman, Kang Yaojiang, also a debtor of the Hyundai project in Handan, has been on the run from creditors since the 2015 Spring Festival holidays, according to the China Real Estate Business report.

Public information showed that Onechain Group had 50 million yuan in registered capital when it was established in 2000.

Since then, its capital has swelled 400 times to 20 billion yuan, according to Southern Weekly. The company has reportedly invested a total of 57.1 billion yuan in 12 projects in seven provinces.

The company's projects include healthcare industrial parks and automobile industrial parks, according to Southern Weekly, which noted that many of projects involve close cooperation with local governments.

Handan government said on its WeChat account on March 2 that the government has set up a team and is investigating the issue, without giving more details.

The story is based on reports by Southern Weekly, China Real Estate Business.

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