World

Elderly retirees face big losses after Chinese trust goes bust, reflecting turbulent economy

Published

2 years ago

March 13, 2024

Elderly retirees face big losses after Chinese trust goes bust, reflecting turbulent economy

CHENGDU, China (AP) — Some investors in a troubled trust fund in China are facing financial ruin under a government plan to return a fraction of their money, casualties of a slump in the property industry and a broader economic slowdown.

Sichuan Trust, headquartered in the southwest city of Chengdu, announced it was insolvent in 2020, stricken by sketchy accounting and failed investments in shopping malls and other projects. A deadline earlier this month to accept a 20%-60% “haircut” or loss on their investments has left some investors in deep financial trouble, according to public announcements and AP interviews with five people affected.

China’s economy, the world’s second largest, depends heavily on real estate development to drive growth and create jobs. Property prices and sales have languished after a crackdown on what leaders viewed as dangerous levels of borrowing, causing dozens of developers to default on their debts.

At the National People’s Congress session in Beijing last week, officials pledged to do more to protect investors. Premier Li Qiang said China would work to control risks and resolve the property crisis.

For the people who put their life savings into Sichuan Trust and similar entities, it’s likely too late. Around 300 of more than 8,000 investors refused to accept a government plan and are looking for legal help, a relative of one investor said. A few who attempted to come to Beijing during the congress to air their grievances were blocked by police, the relative said.

The ruling Communist Party faces a dilemma: Debt is a problem, but falling home prices lead people to scrimp on spending. That squeezes companies’ sales, so they lay off workers and cut back on investment. The result: slowing growth and less wealth to go around.

Inevitably, someone will end up losing out as China’s debt crisis unwinds, said Tsinghua University finance professor Michael Pettis.

“Nobody wants to absorb the loss. If you assign it to households, you weaken consumption even more,” Pettis said. “It’s got to be assigned. And that’s the political problem.”

Trusts are a cross between a bank and an investment fund. Some advertised their offerings as reliable, high interest government-backed accounts. They’re actually private entities that fund projects like factories and shopping malls. Weak disclosure requirements allowed them to use money from new investors to pay what they owed earlier ones, a set-up somewhat like a Ponzi scheme.

“Financial supervision was relatively loose in the past, so the design of these products, including systems for protecting investors’ rights and interests, had serious issues,” said Zhu Zhenxin, chief analyst at Rushi Finance Institute in Beijing. “If underlying assets of financial products won’t generate enough returns to pay such high interest rates, default is inevitable.”

The troubles at Sichuan Trust first surfaced when the government began restricting new sales of trust products in 2020. Without revenue from new investors, it couldn’t pay its outstanding debts.

That summer, Sichuan Trust announced it had 25.3 billion RMB ($3.5 billion at the time) in debts it couldn’t repay. The provincial government and banking regulators took control, ousting the management, reorganizing its books and launching an investigation.

Hundreds of investors staged weekly protests outside the company’s headquarters and their losses became a political issue.

In 2021, police detained Sichuan Trust’s majority shareholder Liu Canglong, a mining and real estate tycoon who was once the richest man in Sichuan, a province of more than 80 million people. He is accused of embezzling trust funds.

In December, the trust announced it would return investors’ funds according to a sliding scale of the original investment. The larger the investment stake, the larger the loss.

That sparked more protests.

“We’re extremely anxious,” one investor who asked not to be named told The AP. “It’s so cruel, the amount of money they’re giving us is so little.”

A person answering Sichuan Trust’s hotline said the company does not take interviews and would not provide comment. Sichuan Trust, the Sichuan provincial government and the China Banking and Insurance Regulatory Commission did not respond to faxed and emailed requests for comment.

The plan to return funds “appropriately favors small and medium-sized investors,” Sichuan Trust said earlier in a public statement, calling it “fair.”

Those protesting fear say they’ve been harassed and intimidated, subjected to police interrogations and threats from their children’s employers. They’ve been barred from leaving Chengdu or, at times, their housing compounds.

On a recent visit to the company’s headquarters, dozens of uniformed officers, half a dozen police vehicles and an empty bus were parked outside. More than a dozen plainclothes agents who refused to identify themselves followed two AP journalists around.

Earlier, a Dutch journalist was shoved to the ground and forced into a police vehicle when he attempted to approach protesting investors.

“They abduct you, they threaten your children,” said another investor, who also did not want to be identified due to fears of more police harassment. “They have so many dirty tricks.”

Analysts say investors were bound to suffer big losses given the size of Sichuan Trust’s debts. Chinese media have reported on the problem, but focused on alleged wrongdoing by those who ran the trust, presenting the repayment plan as a fair solution.

Some of the more than 95% of investors who signed off on the plan said they agreed under duress and were threatened with bigger losses if they didn’t meet a March 5 deadline.

Trusts have a high minimum investment — for Sichuan Trust it was generally 300,000 yuan ($42,000) — and many people believed mostly the relatively well-off were affected.

However, some investors were retirees who said they met the investment threshhold by collecting money from friends and relatives who now want their money back. For them, Sichuan Trust’s default is a calamity.

“They’re so poor, they don’t have money to spend,” said a relative of investors who lost money to the trust. “They don’t have money for medical treatment. They have to borrow money to survive.”

Those interviewed said the name Sichuan Trust led them to believe it was a trustworthy financial institution like a bank, with a steady, fixed interest rates, rather than a risky investment fund. They were attracted by the 8% or 9% interest rates it promised – multiple times higher than traditional savings accounts. Some financially unsophisticated retirees invested large chunks of their life savings.

“The country said trusts are very safe, like banks,” one of the people said. “We didn’t think there would be problems.”

Instead of enjoying their retirements, two of the people said, they’ve had to borrow money from relatives and cut back on their expenses.

“We ordinary people are miserable,” another investor said. “The corruption is so serious.”

China’s roughly $3 trillion trust sector is part of a large “shadow banking” industry in the country, which for decades supplied credit to entrepreneurs and households not served by the state-run banking system. Concerned over speculation and illegal practices, authorities have tightened controls. In 2020, regulators declared victory in cleaning up China’s online peer-to-peer lending industry, or P2P.

Wealth management companies also have gotten into trouble.

“We believe risks could increase, potentially affecting more financial-sector entities, if China’s economic recovery continues to lose momentum and the property sector’s distress is sustained,” Fitch Ratings said in a report after the collapse of another big trust company, Zhengrong.

Officials and analysts say crackdowns have been necessary, but investors footing the bill are questioning how they’ve been carried out.

“I support the Communist Party very much,” one of the investors said. “But some people are blackening the Party’s name.”

___

AP Business Writer Elaine Kurtenbach contributed to this story.

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World

Trump's national security team comes to convince Congress to back Iran war

Published

4 hours ago

March 4, 2026

Press Room

Trump's national security team comes to convince Congress to back Iran war

President Donald Trump’s top national security advisers were to spend much of the day on Tuesday making the case to members of Congress for the U.S.-Israel war on Iran, as Democrats and some of his fellow Republicans clamored for more information.

World

Iran’s senior clerics ‘exposed’ after building strike in Qom, succession choice looms

Published

5 hours ago

March 3, 2026

Press Room

Iran’s senior clerics ‘exposed’ after building strike in Qom, succession choice looms

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Senior Iranian clerics would have been left “exposed” after an Israeli airstrike hit a meeting place where they were supposed to be convening Tuesday — days after a strike leveled the Tehran compound of Supreme Leader Ayatollah Ali Khamenei, a defense analyst has claimed.

The clerics, members of the Assembly of Experts, had reportedly planned to meet at the location in Qom to deliberate succession plans for Khamenei, who was killed in the strikes, according to The Times of Israel.

“This second strike would be another embarrassment to what has been left of the regime,” Kobi Michael, a senior researcher at the Institute for National Security Studies and the Misgav Institute, told Fox News Digital.

“It indicates intelligence dominance and superiority because any movement is detected, meaning they would feel exposed,” Michael added.

Iranian Supreme Leader Ayatollah Ali Khamenei was killed in an Israeli airstrike Saturday. (Getty Images)

“As of now, the leadership would feel insecure and hunted, with all of their plans collapsing one after another.”

“They would feel totally isolated and understand that the biggest risk might come from home — from a potential uprising next,” he added.

Israel Defense Forces spokesman Brig. Gen. Effie Defrin confirmed that the Israeli Air Force struck the building where senior clerics had planned to assemble, The Times of Israel reported.

KHAMENEI’S DEATH OPENS UNCERTAIN CHAPTER FOR IRAN’S ENTRENCHED THEOCRACY

A general view of Tehran with smoke visible in the distance after explosions were reported in the city, Monday, in Iran. (Contributor/Getty Images)

It remains unclear how many of the 88 members were present at the time of the strike, according to an Israeli defense source cited by the outlet. The second strike on Iran’s leadership comes amid a broader military campaign.

As previously reported by Fox News Digital, U.S. forces have struck more than 1,700 targets across Iran in the first 72 hours of Operation Epic Fury, according to a U.S. Central Command fact sheet.

The campaign is aimed at dismantling Iran’s security apparatus and neutralizing what officials describe as imminent threats.

According to U.S. Central Command, targets have included command-and-control centers, the Islamic Revolutionary Guard Corps Joint Headquarters, the IRGC Aerospace Forces headquarters, integrated air defense systems and ballistic missile sites.

FIREBRAND ANTI-AMERICAN CLERIC ALIREZA ARAFI SEEN AS CONTENDER TO REPLACE IRAN’S KHAMENEI

The USS Thomas Hudner fires a Tomahawk land attack missile in support of Operation Epic Fury, Sunday, while at sea. (U.S. Navy/via Getty Images)

“We need strategic patience and determination, and in several weeks most of the job will be accomplished,” Michael added. “Even if the regime does not collapse, Iran will not be like we used to know.

CLICK HERE TO DOWNLOAD THE FOX NEWS APP

“I assume that the U.S. and Israel will establish a very robust monitoring mechanism that will enable them to react whenever the regime tries to reconstitute its military capacities again.”

Emma Bussey is a breaking news writer for Fox News Digital. Before joining Fox, she worked at The Telegraph with the U.S. overnight team, across desks including foreign, politics, news, sport and culture.

World

Hungarian veto proves EU needs less unanimity, says new Dutch PM

Published

6 hours ago

March 3, 2026

Press Room

Hungarian veto proves EU needs less unanimity, says new Dutch PM

Hungary’s last-minute veto on the €90 billion loan to Ukraine highlights the need for the European Union to move away from unanimity, Rob Jetten, the new prime minister of the Netherlands, said on his first trip to Brussels since taking office.

“The new Dutch goverment is in favour of less and less decision-making by unanimity on the European level,” Jetten told a group of media, including Euronews, on Tuesday.

“This is a clear example of why that is important because we cannot explain to our constituents that Europe is sometimes way too level in reacting to great issues that affect us all,” he added.

Jetten called on his Hungarian counterpart, Viktor Orbán, to abide by the delicate deal that the 27 EU leaders reached in December after fraught negotiations. The compromise saw Hungary, Slovakia and the Czech Republic promising the necessary unanimity to amend the EU budget rules in exchange for being exempted from the joint borrowing.

Officials and diplomats in Brussels believe that by vetoing a critical piece of the loan at the last stage of the legislative process, Orbán has breached the principle of sincere cooperation that binds the bloc’s decision-making.

“If you reach political agreement on the Council level, we expect every member state to uphold that agreement. And if not, it’s a big task for the European Commission take action,” Jetten said.

In the new coalition programme, the Netherlands calls for the “simplification” of the Article 7 procedure that can deprive member states of voting rights when they commit grave violations of the rule of law. Hungary has been under Article 7 for years, but there has never been sufficient political momentum to move to the harder enforcement phase.

“It is absolutely necessary that we support Ukraine in the months to come to make sure they can continue their fight against Russian aggression,” Jetten went on.

“With less and less American support for the Ukrainians in terms of money and weapons, it is up to the Europeans to deliver.”

Orbán’s veto centres on the interruption of Russian oil supplies through the Druzhba pipeline, which Kyiv says was attacked by Russian drones on 27 January and has remained non-operational since then.

But Orbán says Ukrainian President Volodymyr Zelenskyy has deliberately shut down the pipeline for “political reasons” to influence the results of the upcoming Hungarian elections. Orbán trails in opinion polls by double digits.

Caught between the two rival camps, the European Commission has asked Zelenskyy to repair Druzhba and Orbán to lift his veto. Meanwhile, Hungary and Slovakia have proposed a fact-finding mission to inspect the damaged section of the pipeline.

“We expect the European Commission to solve this issue,” Jetten said. “If it’s helpful to have any fact-finding missions on the pipeline to fix this issue, I’m open to it. But everything begins with: a political agreement at the Council level is a political agreement.”

‘Too early’ for a date on Ukraine’s accession

Among the first debates facing Jetten as premier is the future of enlargement, a topic on which the Netherlands has expressed well-known reservations in the past.

Zelenskyy is advocating for a specific date for Ukraine’s accession to be enshrined in a prospective peace deal, something that could offset the pain of territorial concessions. Last week, he openly suggested 2027 as an aspirational benchmark.

The Commission says it cannot commit to a clear-cut date but is working on legal avenues to revamp the notoriously complex process and ensure the Ukrainian people have greater certainty in their path to membership.

Asked about the potential reform, Jetten said enlargement should be reconsidered from a “geopolitical perspective” but urged the bloc to be “careful” with next steps, warning that the essence of the European project risks being undermined.

“We are very open-minded to look into broader support for these (candidate) countries, but moving too fast is not the way to move forward,” the premier said.

“I think, at the moment, it’s not possible to set a date for enlargement with Ukraine, but it is possible to talk with them, and I will do that with President Zelenskyy, (about) how Europeans can support Ukraine in the important reforms that they have undertaken. But at this moment, it is too early to set the date.”

Jetten also touched upon the US-Iranian strikes on Iran, which have pushed the Middle East into uncharted territory. Wholesale gas prices have soared in reaction to the war, prompting fears that Europe might soon face a prohibitive bill to refill its underground reserves, which are running low after the heating season.

“Obviously, the Iran war can have a big impact on strategic reserves, not only in Europe but also in Asia. So we have to prepare ourselves for any case that this war will continue for many more weeks and impact the strategic reserves in the Netherlands and abroad,” he said, noting extra measures would be taken “if necessary”.

“I think the broader concern is what this war and everything that’s going on in the Strait of Hormuz is going to affect in terms of pricing.”

‘The Netherlands is back’

Jetten’s D66 party has formed a minority goverment with the liberal VVD and the conservative CDA, all of which support European integration. His tenure puts an end to the fractious four-party coalition headed by the right-wing, Eurosceptic Party for Freedom (VVD) of Geert Wilders, which was marked by constant disagreements.

Among the priorities, his executive has pledged to ramp up defence spending, simplify regulation, promote new technologies and expand renewable energy.

“As a founding (member) and the fifth (largest) economy within the EU, the Netherlands is back at the table to work closely together with everyone here in Brussels and our allies within the EU,” Jetten said.

“We see a lot of opportunities to strengthen the European economy and competitiveness, and also to make sure that we do our job with a lot of tax-based money to invest in the European defence and the European defence industry.”

Jetten and the other 26 leaders are heading for a no-holds-barred fight on the next Multiannual Financial Framework (MFF), the bloc’s seven-year budget. Brussels has proposed a €2-trillion template that some capitals consider politically unpalatable.

Where to cut spending will be a major fracture line. Germany, the Nordics and the Baltics want a greater focus on strategic priorities, while Spain, Italy and Eastern Europe want to preserve the prominence of agriculture and cohesion funds.

The Dutch premier made it clear that the next budget should focus on the big transitions shaping the continent’s future: defence, technology and climate.

“A modern MFF doesn’t mean an exploded MFF in terms of numbers,” he said.

“The Netherlands will look into the numbers very closely, and we will have a lot of debate on this topic in the months to come.”