China keeps lying and hurting the resting the rest of the world. Now, a Wuhan company Kingold Jewellery Inc is at the centre of what is being described as the biggest gold scandal in human history. And as it turns out a veteran of the People’s Liberation Army (PLA), the armed wing of the Chinese Communist Party (CCP) is the one who is accused of having pulled off this scam.
Kingold is China’s largest privately-owned gold processing and jewellery company. It took a loan of around 2.8 billion US dollars with 83 tons of pure gold as collateral. But when the company defaulted in repayment, it was found that what the company claimed to be pure gold was actually gilded copper.
The scam doesn’t match any recent event in human memory. The amount of copper passed off as the yellow metal is equivalent to 22 percent of China’s annual gold production or 4.2 percent of China’s gold reserves as of 2019.
But the world is in for a yet bigger shock. Kingold is reportedly led by Jia Zhihong, an ex-PLA who is known for using his military and CCP links for bypassing regulations and proper audits. He is denying any responsibility for pulling off the biggest gold scandal known to the human race.
But according to an Australian news website Small Caps, the controlling stakeholder and Chairman of Kingold, Zhihong is described as “an intimidating ex-military man”. He is among the more influential of PLA veterans.
Jia had served in the Chinese military in Wuhan and Guangzhou. The veteran had also managed gold mines for the People’s Liberation Army. Kingold itself had started off as a gold factory in Wuhan and was affiliated to the People’s Bank of China.
Later, it would go on to become the biggest privately owned gold processing company in China. Of course, now we know that it was hardly a private entity. Murmurs are such that Jia’s links with the PLA and CCP meant that he could do what he wanted. There was no one to question him or his decisions.
A State-owned insurer did cover some of the loans, but with an ex-PLA leading the beneficiary Kingold, not the lenders. The Kingold scam has led to apprehensions if more of Beijing’s gold reserves do not simply exist.
It is being feared that other Chinese gold processing companies and jewellers with influential links in the CCP could also have duped lenders through fake collaterals.
The Kingold is the final nail in the coffin when it comes to the trustworthiness of China’s so-called private companies. All these companies like Alibaba and Huawei owe allegiance to the CCP and whatever they loot from foreign stock markets including the American ones, go into the hands of the Communist Party.
Jack Ma, for example, is himself a CCP member, and promises to happily hand over all his businesses to the party if it so desires.
The story of seemingly private entities led by the PLA veterans or having close links to the Chinese military is even murkier. For starters, the PLA itself is not a country’s army but only the armed wing of a Communist Party.
Secondly, the People’s Republic of China (PRC) tries to blur the lines between the military and civil establishment by handing over private entities to the PLA. The results are for everyone to see.
Recently, the Pentagon too put 20 Chinese companies, including the controversial telecom giant Huawei on a list of Chinese companies owned or controlled by the PLA.
A June 24 letter from Pentagon addressed to lawmakers stated that it is providing a list of “Communist Chinese military companies operating in the United States.” Pentagon spokesman Jonathan Hoffman said the list included “entities owned by, controlled by, or affiliated with China’s government, military, or defence industry.”
He added, “As the People’s Republic of China attempts to blur the lines between civil and military sectors, ‘knowing your supplier’ is critical.”
China has created a gigantic system of seemingly private entities controlled by PLA to bypass regulations and audit checks. Kingold scandal illustrates the kind of damage that such murkiness can cause. It is time the world kicks these opaque entities with little credibility out of the global financial system.