The USD 589 M fundraising scandal behind China’s straddling bus revealed

The founder of China’s once known high tech transportation solution – the straddling bus dubbed as Batie – was arrested on Sunday for illegal fundraising.

The straddling bus or the Transit Elevated Bus (TEB) was once a popular concept. Huaying Kailai, the company which invested in the bus, said that it was a significant original China invention. TIME praised it as “The 50 Best Inventions of 2010”.

Photo from Sohu.com
Photo from Sohu.com
Photo from Sohu.com
Photo from Sohu.com

The so-called revolutionary transportation invention was aimed at solving city traffic problems. In May 2010, Batie came into public view at the 13th Beijing International High Tech Expo. It claimed that each vehicle could carry 1,200 passengers to reduce 25 to 30 percent of the main road congestion. It also claimed that the time taken for construction of the bus was about one-third the period of a subway construction, and would only cost one-tenth of subway construction costs. Thereafter, it garnered the attention of several international media outlets including BBC, CNN, CNBC which reported on it. The world had seen the project as a potential solution to solve mega city traffic jams.

According to public reports, Huaying Kailai sold a series of financial products in order to raise funds for Batie. The lowest price of its financial product was sold at RMB 1 million (USD 147,267) with an annual return rate of 12 percent. Huaying Kailai raised more than RMB 4 billion in total.

Photo from Sohu.com
Photo from Sohu.com

The public raised questions of Batie being a financial fraud shortly after a quick test run in Qinhuangdao located north of Beijing last August. Soon, the bus’ fake patents were exposed. Last November, state media China Central Television (CCTV) pointed out that Huaying Kailai was suspected of illegal fundraising.

Photo from Sohu.com
Photo from Sohu.com

Bai Zhiming, known as the “father” or founder of the straddling bus, was reported to be under police investigation. According to CCTV, the fundraising fraud sucked more than USD 589 million from 40,000 individual investors.

In end June, the Qinhuangdao government requested for the removal of the straddling bus test line so that the road will return to its normal condition.

(Top photo from Sohu.com)

China Telecom to terminate all numbers without real-name registration in November

China Telecom, one of China’s three major network service providers, announced that users with no real-name registration by the end of November would be cut off from making or receiving phone calls.

A China Telecom executive, Li Anmin, made the announcement on Tuesday, saying that it applied to both China Telecom landlines and mobile phones, Sohu Tech reported. The company would stop doing outgoing call services for some groups of users without real-name registration in October.

According to Li, in 2016 alone, China Telecom shut down over 20,000 phone numbers, most of which were related to telecom fraud: the main reason the company is asking for real-name registration from its users is to fight against telecom fraud.

To crack down on telecom fraudsters, the Chinese authorities introduced a so-called “strictest ever real-name registration for mobile users” in May, aiming to have all mobile phone users in China registered with real identity information by July 2017.

However, Chinese scammers were somehow still able to carry on their telecom scams. Notoriously, two phone scams in August led to the deaths of two college students who had heart attacks after losing all their tuition funds to telecom frauds. One phone number the scammers used belongs to China Telecom.

In fact, many telecom frauds in China have been using China Telecom’s phone numbers. This might be the reason why the company has brought the deadline of the real-name registration half a year ahead of schedule.

We can predict that it will not be long before the other two network service providers China Mobile and China Unicom make similar moves.

(top image from Pixabay.com)

The startup journal IV: The startup scene in China – fake miracles Vs. real screwups

As someone who recently dived into the Chinese startup scene, which is as choppy and as hot as the Red Sea, I sometimes ask myself a question: what am I going to get from the bottom of the sea? Will I find the priceless pearl that I’m looking for? Or will I return empty-handed. Or worse – unpredicted troubles may wrap themselves around my feet, trapping and drowning me.

I co-founded a new media startup AllChinaTech as an observer of China’s IT industry and startup scene. I did it just like every other entrepreneur who believes that we’re surfing on the high tide of the startup growth in China. Since the end of last year, thousands of startups have mushroomed in Beijing at the speed of 50 new startups a day on average. It has earned the capital a new title: “the Silicon Valley of China”.

Many believe that an explosive growth of e-commerce paralleled with the sharp increase of mobile and online consumers has created the miracle of the booming Chinese IT industry. After all, the Chinese digital services market is worth billions or even trillions of dollars, as a 2014 industrial survey showed.

The Chinese government has shown its faith by supporting the development of the IT industry and startups by introducing the “Internet Plus” policy in March. The goal of the policy is to help promote domestic market growth and technological innovation as the main driving forces of the Chinese economy by 2018.

But in August the crash of the Chinese stock market gave investors cold feet. Based on the fact that China’s economic growth is slowing down, many are worried that the miracle of the booming Chinese IT industry is just a mirage. Some leading investors have spread the idea that “ the winter of the capital market has arrived.”

ocean
Photo by Wu Nan

When you are swimming in the sea, it will take a while for you to reach the shore. Waves always come unexpected and the sea water is often not warm. The swimmer knows how deep the sea is, but it does not mean he has to give up right away. Identify the risks you might face and overcome them. But it’s important to be honest.

A downside of the startup scene in China and perhaps in other marketplaces as well is that people often oversell success stories. Both entrepreneurs and investors’ expectations have been pushed sky-high in terms of the amount of money they can raise or invest. In some cases, companies have been caught faking their own fundraising data.

VentureBeat reported in September that one of China’s largest food delivery startups, Ele.me, received USD 200 million less than it publicly claimed in a recent round of fundraising. Its stated USD three billion evaluation was also double its actual evaluation of USD 1.5 billion, VentureBeat said.

It’s easy to understand that startups are keen to spread success stories in order to lure investment. What is under-addressed is that venture capitalists are also causing the fundraising bubble, because they need to bluff about their portfolios in order to compete for promising projects.

When early this year Chinese Premier Li Keqiang gave talks to promote his Internet Plus blueprint, he publicly praised young entrepreneurs who founded startups from scratch. Then, Chinese media profiled a “rising stars” list of entrepreneurs who were born after the 90’s. Shortly after, many of these “stars” were exposed to have faked their glorious stories.

Among them was then-22-year-old Yu Jiawen, who founded social network app Super Curriculum in 2012 and claimed to have attracted 17 million Chinese students and tens of millions USD of investment with internet giant Alibaba as one of the investors. Early this year he had to apologize publicly for lying about their fundraising data. The scandal has caused a rush of staff resignation and rejection from famous VCs.

As a Chinese, I’m often asked by foreign friends about the traditional Chinese concept of “face”, the vanity of keeping up stunning appearances to charm people, just like how a male peacock spreads its magnificent feathery tail to hide his bony body. I guess it could partially explain the bluffing culture of startups in China.

As for me, I just need to keep my fighting spirit when swimming in the sea, stay positive, stay strong and beware of submerged reefs and entangling kelp.

Read startup journal I. , II. , III.

 

Good news for samaritans: Alipay insures against “old-man scam”

Jing Gao

Chinese online payment system, Alipay, has introduced a new type of insurance, claiming it can shield good Samaritans in China from scams and their legal repercussions.

Under the so-called “Senior Helpers Insurance” policy, a policyholder pays three RMB for a year’s coverage of up to RMB 20,000 in litigation costs and free legal advice. If the policyholder unwittingly helps out a senior citizen injured or incapacitated in an accident and is later wrongfully accused of having caused the accident, he is entitled to a claim.

Sinosafe Insurance currently fully provides the policy to residents in 12 Chinese provinces and municipalities. Residents in 19 other provinces can also buy the insurance, although claim support will be limited.

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The “Senior Helpers Insurance” policy is commonly interpreted as the insurance industry’s answer to the growing number of roadside traps that have made national headlines.

In 2013, when an elderly man in Dazhou, Sichuan province fell on the street, three schoolchildren stopped to offer assistance, only to find the man had set them up for monetary compensation by alleging they “knocked him over and caused his injury”. Subsequent police investigation cleared the children’s names.

This August, two schoolchildren in the southern city of Guangzhou were sued for damages by an old man they went out of their way to help on the street. By declaring the “accident” a sham, the court ruled in favor of the two children, who said they felt deeply saddened by what had transpired nevertheless.

While those who fake accidents in China come from all age groups and both genders, a majority of them are seniors, which can be partly explained by a lack of financial income or social security on the part of offenders. Seniors also tend to have a higher success rate in duping unsuspicious strangers and extorting compensation, thanks to their seeming guilelessness.

The prevalence of good Samaritans falling victim to planned setups in China has led to a worrisome bystander effect, where people are reluctant to intervene and would rather walk away for fear of getting into trouble and being framed. The debate about whether or not passersby should help strangers in distress has become so heated it was raised during the official civil servant exam in Henan province in 2015.

This newly invented insurance policy has prompted another round of soul-searching online. “In today’s China, you have to take out insurance before you can do any good deeds. It is beyond pathetic,” one commenter wrote on Sina Weibo, the Chinese Twitter.

fulaoren

Photos from Baidu Image

Uber suspends thousands of driver accounts in China’s Chengdu

Uber Chengdu has suspended thousands of its driver accounts, China Business Journal on Monday reports.

It is reported that Uber drivers, whose accounts have been banned, have gathered at the QingYang district police station where Uber Chengdu has its business registration. Drivers are demanding they receive the account balances from their suspended Uber accounts.

Announcing via Weibo today, Uber Chengdu claimed suspensions were due to fraud or ‘Shua Dan’ – the Chinese term for fake trip – detected when drivers claim compensation for deliberately falsifying trips.

According to Uber China’s driver service center, fraud committed by drivers or passengers can usher in the permanent suspension of accounts and confiscation of account balances.

Uber Shanghai has also punished drivers for the same fraud practice.  A few suspended drivers last month picked fights with Uber staff after negotiations broke down over account balances. Police were later called to the scene.

Uber founder and CEO, Travis Kalanick claimed at the Baidu World Conference earlier this month, that Uber China sees over one million transactions per day. Uber Chengdu is among Uber’s top 10 cities for business development in the world, according to the statement it released today.

Uber Chengdu was investigated by the Chengdu Traffic Management Bureau in May but operations have not been influenced. Last month, a case was filed against an Uber Chengdu driver for robbery and molestation of a female passenger.

Apart from the new regulatory climate which will soon affect all ride-hailing services in China, regulating its own operations remains a problem for Uber.