Recently, a highly unbelievable fraud case has been widely discussed on the Internet in mainland China, but all related reports have since been deleted. The main instigator behind the fraud was the municipal government of Yangzhou City, Jiangsu Province, which involved the wages of thousands of migrant workers and hundreds of millions of project funds.
Please watch a video report on the situation by the China Observer:
Netease and other websites in mainland China recently reported on a nearly unbelievable fraud case. According to the reports, in 2020, an individual claiming to be a “Yangzhou businessman” approached three Shanghai engineering construction companies and convinced them to take on the renovation project of an old residential area in the Jiangdu District of Yangzhou City in Jiangsu Province.
The individual charged the companies tens of millions of yuan as intermediary fees. However, by the end of 2022, when the renovation project covering 1.8 million square meters across over 40 communities in Jiangdu District was almost complete, the companies were told that the government had no record of the project and had been scammed.
According to Mr. Gu, Mr. He, and other individuals in charge of the construction project, they assumed control of the renovation project for the senior community in Jiangdu District in 2021. From that point forward, they covered the cost of various materials and pre-paying workers’ wages. They believed it to be a government-run project and were eager to execute it to the best of their ability.
After incurring expenses exceeding 100 million RMB, they could no longer make further advance payments. When they attempted to negotiate project payments with the relevant departments, they were informed by the head of Jiangdu District: “You met a scammer. Our government has never entrusted you to renovate the old community…”
In May 2021, the launch event of this project was attended by the Director of the Jiangdu District Government Office and head of the Old City Renovation Project, Ms. Sun, and the deputy secretary of the Jiangdu District Committee and deputy head of the old city renovation project, Mr. Gao. In addition, the construction contract was signed with each residential precinct and property manager.
Throughout the construction period, the residential precinct and property managers frequently visited the site and presented awards and gifts as a token of gratitude. However, after over a year of construction, they were informed that they had fallen victim to a fraudster when they requested partial payment.
This outcome left Mr. Gu and Mr. He feeling overwhelmed. They then embarked on a quest to defend their rights, seeking assistance from various avenues. However, instead of receiving support, they encountered interference and threats from law enforcement in multiple jurisdictions in the name of “maintaining social stability.”
More than a thousand migrant workers, who Mr. Gu and Mr. He employed, eagerly awaited their wages to return home for the Chinese New Year. Mr. Xiao, Mr. Huang, Mr. Wang, and others, along with Mr. Gu and Mr. He wrote an open letter to the media entitled “Yangzhou Jiangdu District Urban Renewal Project Leaves More Than One Thousand Migrant Workers with No Hope for Wages.”
The letter was widely circulated and shared by various online media starting December 16, 2022. In the afternoon of the same day, Mr. He received a call from a deputy chief of the police station in Xiannv Town (仙女镇) in Jiangdu District, who threatened to arrest the individuals involved. This greatly frightened Mr. He and the others.
A Chinese media enquired with the Yangzhou Municipal Committee to verify the incident’s authenticity. They soon received a reply: “Relevant procedures have been initiated to deal with the situation.”
However, according to several representatives of the migrant workers, the authorities in Jiangdu District are supposedly holding discussions on the issue of construction funds and the wages owed to the migrant workers. Meanwhile, a deputy chief of the police station is secretly encouraging the migrant workers to confront their boss. It is evident to anyone with common sense that the authorities have no intention of resolving the issue.
According to the lawyers, the fact that district leaders attended the project’s launch ceremony and that the safety agreements signed by the residential communities were obtained during construction, as well as the fact that the construction lasted for nearly two years, should have made the government departments aware of the renovation in over 40 districts. Hence, they should have carried out their respective supervisory responsibilities.
The incident was initially posted by @Kailei (凯雷), a Weibo blogger with over 2.11 million followers that follows social events. However, the screenshots of @Kailei quickly spread through mainland social media. As a result, many believed the incident to be quite “bizarre.”
“In typical fraud cases, the scammer usually only obtains a deposit for the project and then runs. However, in this case, it is speculated that the fraud was committed because of a shortage of funds within the local government. Despite this, the renovation of the residential communities was deemed a political task and had to be completed regardless of the financial situation.
“As a result, the authorities allegedly contracted a few casual workers to scam the out-of-town construction companies.
“The government gave the green light throughout the two years of construction. But when at checkout, it became a fraudulent project, and the several casual workers hired by the government ran away.
“It’s surprising that the project was carried out without proper documentation. The Quality Supervision Bureau is stringent in collecting money and imposing fines at every step. In addition, the government must approve every stage of the construction. If the construction team was unaware, wouldn’t they have sought support or clarification? It seems unlikely that the project could have progressed without proper approval.
“After reading your tweet and the attached picture, my initial response was that someone had made this up, so I searched it up, and the results are as shown in the attached picture. But unfortunately, all the links have been deleted. This one could be the number one fraud in the history of humanity.”
Some people raised five doubtful points, indicating that the Yangzhou City government has an unshirkable responsibility for the incident.
1. The renovation of more than 40 residential communities is a massive project in full public view. The construction lasted one year, involving rain and sewage diversion, facade renovation, pole line sequencing, and other projects. The number of departments involved is beyond imagination. It is challenging for just a residential community to arrange this.
Generally, it would be reported to the city bureau leaders for overall coordination. This is the level of capability a scammer must possess to succeed. Wouldn’t the government notice such a significant movement? It should have been stopped long ago if it was found to be a fraud.
2. Contracts must contain various bidding documents, design and survey drawings, project approval reports, and construction permits before construction. Even if the scammer had falsified all the necessary documents, the construction companies would have still needed to engage in discussions with the designers and address any technical issues that arose during the process, which the designer would have identified.
How is it possible the scammer also knows the technical details? Unless they even defrauded the designers altogether.
3. Since it is a scam, why did the local government media report the news of the old city renovation? Unless there were two renovation projects? A media report issued by Jiangdu District’s official media outlet Jiangdu Today and a report from the official media outlet Yangzhou Daily concerned the transformation of the old city district in Jiangdu.
4. The head of the construction company said that in May 2021, the project also held a special launch event, which several prominent district figures attended. The project was initiated after receiving approval from the residential community leaders, the district property managers, and the signing of construction safety agreements.
It would be beneficial to publicly release photos of these individuals and determine whether or not this is a scam. If it is found to be fraudulent, all parties involved should be held accountable and face arrest.
5. Even if the head of the construction company or the migrant workers did not know the local government officials, wouldn’t the residential community leaders know? It is reported that during the construction process, the residential communities and property departments kept in touch with the construction company, and several residential communities sent recognition awards to them.
Even if it is discovered that the project is fraudulent, the local government cannot simply turn a blind eye and must take responsibility for its part in it.
Due to COVID-19, the Chinese authorities recently implemented a 3-year dynamic zero-COVID policy. As a result, the frequent lockdown of cities and citywide PCR testing has caused much suffering to the people and has crushed the economy.
Local governments must bear the high costs of PCR testing amid a real estate downturn, and many are already suffering severe deficits. For example, in Jiangsu Province, where the above scam occurred, the homes of some civil servants were recently “raided” and forced to pay for the local government’s financial shortages.
Recently, someone asked on the popular Chinese Q&A website Zhihu (知乎): “Have you experienced a moment when the political circle is shrouded in darkness?” The answer of an anonymous user triggered waves of discussion but has already been deleted.
The local government in Jiangsu Province faced financial difficulties and resorted to raiding the homes of civil servants in the middle of 2022. In conjunction with the County and District discipline inspection commission, the city formed joint working groups to investigate instances of civil servants engaging in additional work outside their official duties.
The unlucky ones that were investigated initially thought the discipline inspection commission came to boost their performance record. However, after realizing the real reason they were there, the workers were quite cooperative and intended to pay the penalty.
However, the fines imposed by the Discipline Inspection Commission are staggering. County-level workers were faced with penalties ranging from 600,000 to 700,000 RMB, while higher-level officials were required to pay a shocking 1 million RMB, with no room for negotiation. Furthermore, the fines had to be promptly transferred to the local government’s account, and the receipt was presented to the Discipline Inspection Commission to resolve the case.
The investigated civil servants later realized that they were being used as pawns. Each government department had 5-6 people caught, and some had up to a dozen. There is a rumor that the city confiscated 2.5 billion RMB in one swoop.
This netizen said it was an eye-opener even for someone in the workforce for over 30 years.
Specific means used by the government included looking back at 20 years of bank transactions and e-transfers, and some even check the accounts of their wife and children and require them to explain any income that is not salary. Then a penalty estimate is reached based on the family’s financial situation. The raids were motivated by the government’s desire for financial gain.
The individuals who were penalized were, in fact, the backbone of each department, and their offenses were limited to illegal employment rather than corruption. Consequently, no one was dismissed or demoted due to the investigations.
The netizen also said that unprecedented financial pressure drove the local government’s actions.
Take a county under the city’s jurisdiction as an example; the GDP is over 100 billion, and urban investment bonds account for about 40 percent of the GDP. But urban investment has only emerged in the past few years, and local governments have been borrowing on a large scale before that.
All schools, hospitals, and central departments have borrowed money. An accountant in the local bureau told him that the county’s debt is at least 200 percent of GDP, and the urban investment bond is the last straw.
Finally, the Internet user mentioned a phenomenon similar to the Yangzhou fraud incident: A specific town wanted to start a construction project, but the city did not have enough money. It was still forced to start the project and was a free ride. The construction tcouldn’tdn’t get any money, so the town had no choice but to withdraw.
They then found another construction team to continue the cycle; when they had exhausted the local ones, they went to Guizhou and Yunnan Provinces to fool the out-of-towners into doing it. In the end, the project went through 8 construction teams, with an average owing of 300,000 RMB for each team, with one company being owed 10 million RMB. Ultimately, six construction teams collectively went to the county to protest.
