A project to increase the world's shipyard capacity for a big new order may sound like a pretty bad idea, but those involved don't normally go to jail for it like the 21 people that Chinese police in Fujian province arrested last month.
They are suspected of involvement in a pyramid scheme that offered punters equity in a soon-to-be stocklisted shipbuilding company with a huge fictional orderbook.
After a two-month investigation, local and provincial police raided Fu'an Huan'ao Ship Development Co Ltd (Huan'ao) in Ningde plus other location s on 5 November, freezing 240 bank accounts and confiscating some CNY 27m ($3.92m) in investor cash, according to Chinese shipping news website imarine.cn.
The former Huan'ao shipyard in Ningde prefecture north of Fuzhou previously built small vessels up to 17,000-dwt handysize bulkers, as well as doing repair work. In 2016 it was acquired by a company called Huanyun (Fujian) Equipment Manufacturing Service Co Ltd.
Under the leadership of two alleged ringleaders identified only by the surnames Chen and Zheng, Huanyun used the Huan'ao plant to convince investors of the reality of a fictitious massive state-backed order that would put their little yard on the map of world shipbuilding, and on the Shenzhen and Hong Kong stock market as well.
The multi-level marketing scheme to raise pre-listing equity by crowdfunding was conducted through meetings at locations all across China, as well as through the ubiquitous Chinese social media platform Wechat.
Industry observers suggest that the arrest of the Huanyun shipyard pyramid gang, while wholesome in itself, does little to address the real problem: not fake orders at fake yards but real ones at real yards boosting ship supply. On Watch is not aware of any Chinese plans to get the Chinese criminal justice system involved in efforts to discourage overcapacity at this time.
