BEIJING May 4 Creditor banks are taking legal action to freeze the assets of Dalian Shide Group, a plastics-to-property conglomerate founded by a close business ally of disgraced Chinese politician Bo Xilai, Chinese publications reported this week.
The lawsuits are one of the first signs of economic fallout from Bo's ouster in China's largest political scandal in decades. Reuters reported this week that Bo's political stronghold, Chongqing, is hoping to sell distressed property assets and shore up its finances.
Shide owes about 8 billion yuan ($1.27 billion) in debt, respected financial publication Caixin Magazine reported, much of it borrowed against its PVC production lines in order to finance real estate projects.
Shide's founder Xu Ming was detained the day before Bo was ousted as party secretary of the inland port city. Bo, whose wife is under investigation for the murder of a British citizen last year, has not been seen in public since.
Authorities are now investigating the relationship between Bo and Xu as part of their wider probe of the ambitious politician. Forbes estimated Xu was worth $650 million in 2010.
A search of public records has not revealed any public financial links between Bo and Xu's businesses. But Xu's companies won contracts when Bo was Dalian's mayor and his businesses prospered as the politician moved up the political ladder, according to sources and media.
Three of Shide's biggest lenders have sued the group in a court in Liaoning Province, in northeast China, Caixin reported. Shide is based in Liaoning's port city of Dalian, and is a shareholder in the Bank of Dalian, which, despite its status as a local city bank, opened eight national branches and was planning an initial public offering this year.
In April, Shide denied Chinese media reports of its financial troubles and posted a statement on its website saying operations continued normally.
A call made to the telephone number listed on Shide's web site did not connect. An employee who answered the phone at Shide's Beijing office said she did not have information regarding Shide in Dalian and refused to give contact information for its Dalian headquarters.
Five banks in the central province of Henan have also sued in a Zhengzhou court to freeze assets related to Dahe Xinxing Construction Products Co, a production line owned by two Shide subsidiaries. Caixin said the local Bank of China branch is exposed to 60 million yuan in debt related to that project. ($1=6.31 yuan) (Editing by Neil Fullick)