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While there's plenty of optimism in the business community of Wenzhou, entrepreneurs in the city of Changshu in Jiangsu province are struggling to make ends meet. Some of them even chose to end their own lives in the face of great economic difficulties. Gu Guanhua ran a private loan company in Changshu before he killed himself in November 2011. He left a debt of hundreds of millions of yuan, throwing his creditors into disarray.
Yin Huilin lent 5 million yuan to Gu Guanhua last November, with Gu's death, Yin might not be getting any of his money back.
Yin Huilin, general manager of Chengxinwufang Equipment Company, said, "Production has stopped completely. Though I have bought raw materials, I can't afford the cost of daily production."
Yin Huilin says he is now losing 10, 000 yuan everyday due to halt in production. Yin Huilin said, "Gu and I were friends. We met at least once a week, if not everyday. He said he only needed the 5 milion yuan for about a week. I couldn't imagine he would be dead just one day after I gave him the money."
And Yin is not the only lender who might not be seeing his money again.
Gu also borrowed 4.5 million yuan from Yu Weidong, owner of a footwear company in Changshu, to raise funds for his private loan company. But according to their agreement, the debt was not to be paid by Gu's company, but by Gu personally. Yu said he knew there was something fishy about the arrangemetn, but he still said yes.
Yu Weidong, general manager of Huadong Footwear Company, said, "Gu used to help small companies like mine in getting loans. So I thought I should pay him back. On the other hand, he also had quite strong influence among local bankers. If I didn't lend the money to him, he might say something bad about me. And I could never get money from other loan companies or banks."
Most business owners in the region were familiar with Gu's illegal operation. Yin Huilin said, "Private loan companies are not allowed to raise funds publicly according to financial regulations. So Gu borrowed money on his own name, not as a representative of his company. And we all do the same."
Gu borrowed a total of 60 million yuan from a range of different companies, all in his own name. Yin says it's still not clear if Gu has left anything behind to clear the debt. But one thing is for sure, cases like Gu's have made it tougher to get private loans than ever before.