Huaxi Village, in Jiangyin City, Jiangsu Province, known as the “First Village,” is the most prosperous in China. However, it’s reported that the village is saddled with $5.8 billion (40 billion yuan) in debt and is on the verge of bankruptcy.
From the beginning of 2021, investors revealed to “The 21st Century Business Herald” newspaper that the Huaxi villagers were “flocking to withdraw money.” A video posted by the Observer Network on Haokan on February 26th, 2021, showed hundreds of people queuing in the rain to withdraw money. Many security guards were mobilized to maintain stability.
However, at that time, incumbent officials of Huaxi replied that Huaxi had enough money, “it is normal for people to line up to withdraw money at the beginning or the end of the year.”
However, recently, NetEase reported that Jiangsu Huaxi Group might be facing a “bank run” this year. Many people holding 3-year shares of the Group have requested the Group to pay cash. The media also pointed out that Huaxi village, in the past with “everybody living in villas and having luxury cars,” is drowning in debt of $5.3 billion due to the lack of industrial advantages and declining prestige and is on the verge of bankruptcy.
“Bank run” is often used to refer to people rushing to banks to withdraw their deposits. When depositors’ confidence in the bank is shaken because reserve capital is insufficient and it is challenging to convert cash, it leads to a “bank run.” The phenomenon of massive depositors withdrawing money from banks can bring down a bank or even the entire banking system.
As early as 2016, some media reported that Huaxi village was indebted to nearly $5.8 billion, and the debt ratio was continuously increasing, according to Hong Kong 01.
Looking back on Huaxi villages’ development process, it was officially opened as a scenic spot in 1978. Class A shares (common shares for retail investors) of Huaxi village were listed in Shenzhen in 1999. As a result, Huaxi Group became the first listed company to be named after a village in China. The mainland media also hailed the village as “the leading stock of the countryside.” In 2020, Huaxi Village was selected for the list of “National Rural Tourism Key Villages.”
Huaxi Village is located to the west of Huashi Town, Jiangyin City. According to the Annual Report, the main business areas of Huaxi are chemical fibers, textiles, and several other industries. But by 2015, the business activities of Huaxi were peppered with “investment, mergers and acquisitions, and asset management businesses,” confirming the establishment of a financial platform “investment, financing, asset management,” changing the financial strategy of Huaxi.
According to incomplete statistics from Yema Finance, Huaxi village has participated in many financial fields such as banking, securities, monetary funds, and leasing. In addition, it participated in 11 listed companies and 10 non-listed companies in the National Equities Exchange And Quotations (NEEQ) system.
However, according to a 21 Century Business Herald reporter, in the giant enterprise cluster of Huaxi village, in addition to listed companies, many medium and large enterprises have converted into state shares, and Huaxi village shares fell below 30%.
As of the end of March 2018, the total liabilities of Huaxi village reached $5.7 billion, and the debt-to-total asset ratio reached 68.64%. The accrued interest payable is $4.1 billion, and the short-term debt in one year is $2.9 billion. During the same period, working capital was $1.1 billion, restricted capital was $732.4 million, and the financial gap between capital and liabilities was noticeable.