Qbao mania

By Xie Jun Source:Global Times Published: 2018/1/9 17:48:39

Despite allegations of illegal fundraising, fallen-from-grace company still strongly supported by fans


The locked front doors of Qbao's empty Shanghai office located in a residential building on Monday Photo: Xie Jun/GT

Chinese people's craze for online wealth management does not always have a happy ending. Approaching the end of 2017, internet company qbao.com (Qbao) was suspected to have been illegally collecting public funds, with the company's operations and capital later becoming frozen. Despite this, Qbao's fanatic investors have nonetheless sworn continuous loyalty and support, even after the company's CEO recently turned himself into the police. When the Global Times talked to a fan who invested in Qbao, he explained why he supported the company so much. Experts have since cautioned that investors should maintain a cool head when facing a seemingly "safe" investment opportunity with a relatively high interest rate.

In recent years, China has seen the collapse of several internet companies due to a series of illegal collections of public funds, with two notable cases being P2P lender Ezubao as well as Fanya Metal Exchange.

Now another company, Shanghai-based qbao.com (Qbao), which was founded in Nanjing, capital of East China's Jiangsu Province in October 2010, is being accused of committing the same crime.

The WeChat e-commerce giant in recent years has cultivated a large number of supporters - dubbed Baofen (a fan of Qbao). Those fans have been not only investing money in the company's projects, but also swearing continuous loyalty and support, despite the company's CEO turning himself into the police toward the end of 2017.

"This shows the reality that many Chinese people are still strongly short of money and are crazy for high-returning investment channels," Li Chao, an analyst at Beijing-based market consultancy iResearch, told the Global Times on Friday. 

Police investigation

On December 27, 2017, the Nanjing police announced on its public Weibo account that Zhang Xiaolei, CEO of Qbao, had turned himself into the Nanjing police one day earlier.

A Xinhua News Agency report on December 29 said that the Nanjing police had taken criminal "coercive measures" against Zhang due to suspecting he had committed the crime of illegal fundraising.

The news report is now the only piece of content displayed on the official website of qbao.com. Qbao's mobile app was still frozen as of press time. The Global Times also dialed Qbao's customer service number several times, but nobody answered.

On Monday, the Global Times visited one of the company's offices, which is located on the third floor of a residential building in Yangpu district of Shanghai and is reportedly the latest office of Qbao to be established before the company's operations were suspended by the police.

The glass office, which is dark, small and contains about 20 seats, was locked. The Global Times, however, could see some power wires on the floor, but there were no computers or other office supplies on the desks.

A neighbor, who works for one of the other companies on the same floor as Qbao in Shanghai, confirmed to the Global Times that the aforementioned room was once an office of Qbao, but he said he didn't know much about the company.

"The room has been deserted for quite some time," he said. 

Loyal Baofen

But the sudden shutdown of Qbao has not quenched Baofen's admiration for Qbao, or for Zhang Xiaolei.

Many fans have posted comments under one of Zhang's most recent Weibo posts, and in one of those comments, one Baofen said she promised not to draw out cash before Qbao resumes business, in order to "live and die with Qbao."

Mu Qing, who lives in Nanjing, is one of those Baofen. He got to know Qbao in 2013 when he was still a college student, but did not make any investments until 2015. During that period, he "watched and analyzed" the business model of Qbao and gradually became convinced that the company could be trusted.

During a recent interview with the Global Times, he also showed a kind of worship for Zhang. "When I first saw him, I got the impression that he liked to boast a little. But later I saw he was in many real jobs, in all the many plants he had set up and invested in," he told the Global Times on Friday.

After December 27, Mu's account on qbao.com became frozen.

"I became very tired of comforting other investors, some of whom were so anxious that they nearly killed themselves. But we all trusted Qbao, and we will wait," he said.

He also said that if Qbao resumes its business, he will continue his investment. "Why should we give up on such a good company?" he asked, adding that he might even consider working for Qbao as well in the future.

On Tuesday, the Global Times saw that supportive Weibo posts had continued to emerge, singing the blues for Qbao and urging local police to "let Zhang go home."

High yielding?

For investors like Mu, a big reason why they don't break off from Qbao is due to its high but seemingly steady investment returns.

According to Mu, the annualized return of Qbao's investment was about 56 percent around October 2015, the highest ever level. However, the rate has been dropping gradually since, and in 2017, the company's annualized return reached 36 percent.

"Such returns include dividends from Qbao's real-economy projects, as well as pay from the website to investors who were carrying out daily missions like surveys and raising suggestions for the company," he said.

Mu also said that he was very confident about the safety of his investment in Qbao because the returns are backed by a variety of high-return real-economy projects conducted by the company.

According to media reports, Jiangsu Qianwang Information Industry Group, of which Qbao was a subordinate, has invested in an array of industries ranging from ride-sharing, wine and drones, to healthcare and food.

A report from 163.com in October 2016 also noted that Qbao owned at least 30 billion ($4.62 billion) worth of property by that time.

According to Mu, the company switched its focus to WeChat e-commerce in 2015, which has proved to be a profitable business given Qbao's gigantic user base and strong user adhesiveness.

"At least for me, Qbao has never broken its paying back promise," he said.

Some experts the Global Time talked to nevertheless pointed to the risks of Qbao's business model.

"The cost of online lending is higher than traditional banks, and it's harder for them to get profits, not to say with such a high return rate. This model can't be sustainable unless the company has a hand in some of the so-called grey areas with alarmingly high returns," Li from iResearch said, stressing that investors should watch out for any investment with an interest rate higher than 15 percent.

Xue Hongyan, director of the internet financial center under the Suning Financial Research Center, said that for many investors, they know the risks, but they still chose to neglect them, "for the sake of interests."

"They know it's a trap, but they don't want to jump out," he told the Global Times on Friday.

Xi Junyang, a finance professor at the Shanghai University of Finance and Economics, also said that he understands why so many investors chase after Qbao.

"They don't want their 'money sources' to be cut off," he told the Global Times on Sunday.

According to a report by caixin.com published on Monday, more companies suspected of illegal crowdfunding have emerged in Nanjing. The local police have since put up banners and posters warning residents of the potential risks, but have achieved very limited results.

Li said that, generally speaking, there has so far not been any proper execution of government regulations on internet companies. "The general laws exist, but there are not enough detailed guidelines, like who should supervise and how the supervision should be conducted," he said.



Posted in: ECONOMY,BIZ FOCUS

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