Wednesday, January 13, 2016

3D Modular Company Bilks Investors Out of $1.6 Billion

This is not about a modular factory but rather a 3D Printed House factory that uses prefab parts to construct the home. With all the hype about 3D printing lately, this “story is a must read.”

A fast-growing Chinese developer who claimed to be able to build cheap, renewable 3D-printed houses that take just three hours to assemble has attracted plenty of media attention and investor cash in recent months in China.

Zhuoda Group raised about 10 billion yuan ($1.57 billion) from more than 400,000 Chinese investors by selling financial products linked to these homes that guarantee annual returns as high as 30%, Watching, a digital publication owned in part by Alibaba, reported recently.

But at least one of the company’s supposed backers does not exist, and its financial products don’t have any underlying assets to support those returns, Watching reports.

China’s retail investors have long been looking for alternatives to the country’s low-interest bank accounts and volatile stock market, and are diving into new financing schemes like Zhuoda and wealth management products issued by banks. Regulation in China is not keeping pace with the growth of these new products, though. Fanya Metal Exchange, a government-supported trading platform that lured an estimated $6 billion from around 220,000 Chinese investors is now suspected to be a giant ponzi scheme.

Too good to be true?
Founded in 1993 in North China’s Hebei province, Zhuoda claims (link in Chinese) to have a net asset of over 100 billion yuan ($15.7 billion) and around 15,000 employees. In 2006, it set up a subsidiary Zhuoda New Material for modular home construction, in which buildings are factory-produced in pieces and then assembled on site. Zhuoda claimed it had created a new composite material that could replace cement, wood, pottery clay, and stones—and could be recycled. The material could cut construction times and slash labor fees, the company said.

Zhuoda got tons of publicity in China for its 3D-printed houses as it showcased the technology in different Chinese cities, from both Chinese state media and 3D printing enthusiasts and tech media around the world. It started winning contracts (link in Chinese) with local governments.
But as the excitement built, Zhuoda never clarified which parts of those modular houses were 3D-printed, nor linked its “new composite materials” with 3D printing on its website.

Zhuoda claims that its new materials subsidiary has 2 trillion yuan ($ 313 billion) in domestic and international orders in hand, and that the overall modular home market in China is worth 15 trillion yuan ($2.3 trillion). It claims its modular construction generates a profit margin of 33%, enough to pay investors’ interest.

1 comment:

TN MODULAR said...

"There's a sucker born every minute"