An unknown case of financial ‘magic’ in China

Cedar Holding is a Fortune 500 company headquartered in Guangzhou city. Its core business is commodity supply chain management and commodity trading. They claim to be the largest company in non-ferrous metals in south Asia. But they are mainly engaged in the copper trade.

Founded in 2015, the company has grown tremendously. In 2016, its revenues nearly tripled compared to the previous year to $24 billion (157 billion RMB), and in 2017, this time increased by nearly 50 percent to $32.7 billion and entered Fortune’s list of the world’s 500 largest companies. As of last year, it is ranked 359th on the Fortune 500. According to this list, it is the 16th largest company in China.

The company came to the fore in 2020 by purchasing British Stemcor, one of the world’s largest steel companies. Cedar’s founder and chairman of the board, Zhang Jin, was one of Davos’ most prominent figures in 2019.

The main activity of the Holding is to provide financing to companies engaged in commodity trading. Let’s say a company receives an order for 100 million copper wire to be delivered six months later. In order to deliver this order, it needs to produce by purchasing 70 million raw materials. Cedar gives this 70 million to the company in question, then sells Asset Management Products (VYU) to finance it and raises money from investors. [1] Somehow, when the loan company makes the sale, it will pay back 70 million with interest!

AVMs are a widely used financing model in China. It is usually issued by real estate development companies and banks to finance certain projects and sold to individual and institutional investors. For example, there is even a company that sells VYU for the financing of the cemetery project that it will realize after making a contract with the local government for the land.


Cedar Holding sales revenues grew at a dizzying pace (RMB billion)

VYs are highly preferred since their yields are higher than deposit rates. But they are not covered by insurance like bank deposits.

Cedar Holding raised $3.15 billion from nearly 8,000 investors with the sale of VYU. The picture that emerged after it announced last February that it would not be able to make the due payments is as follows: The company actually borrowed money by exaggerating its receivables through sales on paper, which is not true, by showing them as collateral.

Zhang Jin, Cedar’s founder and chairman of the board

For example, Guangzhou Lianhua Ltd., a subsidiary of the Holding. He sold 70,000 tons of electrolyte copper worth RMB 3 billion to a public company. The public company in question also put a profit on the same property and this time invoiced Shanghai Huixiang, a subsidiary of Cedar. That company sold the same product to Guangzhou Lianhua, the first seller, after a while. During this back and forth process, the goods were actually sitting in a warehouse in Guangzhou, and they didn’t even come out the door! But Cedar Holding has collected three times bills of approximately 3 billion dollars and sold VYU as if it was a RMB 9 billion receivable.

Another successful trade example is this: the annual capacity of the company’s two copper smelters is 200 thousand tons. But in 2020, they managed to sell approximately 2.5 million tons of copper products.

Some public companies in Guangzhou have even formed partnerships with Cedar as well as trading on paper. In other words, public companies probably also made profits on paper.

Cedar’s headquarters in Guangzhou

of Cedar, Investors can easily sell VGIs because they are under the guarantee of a huge Fortune 500 company and do business with public companies.

For some reason, the western economic media did not give much space to the ingenuity of this inflated Fortune 500 company. On the other hand, Cedar, a publicly traded company, still continues its activities.

In fact, it cannot be said that it is an isolated incident. It’s a financial jungle where it’s not easy to tell which tigers are made of paper.

The total value of VPIs, the most important instrument of shadow banking in China, is almost $4.4 trillion. Among them, the number of problematic ones doubled in 2021 compared to the previous year and reached 14.4 billion dollars.

Considering that VYs are preferred as a savings tool even by small investors, the continuation of this trend seems to cause a new problem, such as a light ball, which will negatively affect economic stability.


[1] Wealth management products (APPs) are a high-yield shadow banking instrument widely sold by banks and financial institutions in China.

Who is Cevdet Kadri Kirimli?

He was born in Izmir.

He worked as a manager in different companies at home and abroad.

He lived in China and Hong Kong.