Fanya’s year of discontent rumbles on

By Myles McCormick
Published: Thursday, 22 October 2015

Bourse lock down continues; irate investors protest at treatment while government intervention is requested.

A trading halt at China’s Fanya Metals Exchange, which has now been in place for three months, continues to cause confusion and anger among investors as the state maintains its distance.

A report by Reuters newswire in October indicated that public ire was growing over the government’s inaction with regard to the Yunnan-based bourse, which forms a trading platform for rare earths, among 14 other minor metals, including indium, germanium, antimony and vanadium.

"President Xi and Premier Li said we should build our 'China Dream’, but now even our basic rights, our property rights, can’t be protected. How can we achieve the 'China Dream?’" one investor said.

The news service reported that 80,000 investors are involved and that the outstanding investment is Chinese renminbi (Rmb) 36bn ($5.7bn*).

An assumption that the government was backing Fanya has caused distress among investors, many of which believed investment losses would be covered.

"The ad was playing on [state broadcaster] China Central Television for a month in 2014," another investor told Reuters, while a third stated: "Our losses are not only in money but also in our trust in local governments like the one in Yunnan."

The exchange ceased trading in July and has not said when it will resume operations.

Protests against the exchange followed its closure, with investors demanding their money amid fears that $6bn in value had been lost. 

In August, investors called for a police investigation into the matter.

The exchange told investors in September that they should accept its share restructuring, adding that if it is forced into liquidation they will get nothing, according to reports by Metal Bulletin.

"The best solution is that the exchange finishes the final [stages of] rectification to meet local government requirements, promotes a strategic share restructuring of the bourse, carries out solutions including [arranging] financial support and converting debt to shares and so on, to maximize [the protection and benefits to those with an interest]," Fanya said.

"The worst plan [would be] to apply bankruptcy liquidation immediately; it’s a quick release for the exchange and its investors," it added, noting that its investors would not be the first ones to get paid, and might not be paid at all as the bourse has few assets and most of its previous profits had already been paid to investors.

Shan Jiuliang, Fanya’s founder, who in August was captured by a group of angry investors continues to insist that he has done nothing wrong, the South China Morning Post reported.

"I did not take the money from the investors," he said. "People are losing their minds. But it does not help the situation if they act irrationally."

The exchange met investor representatives on September 29 to discuss its restructuring plan. Some investors who had been waiting outside the exchange’s headquarters in Kunming, said that nobody from the bourse had come to meet them.

*Conversion made October 2015