What is the Yin Guangxia incident?

The Yinguangxia Trap

The truth couldn't be clearer: Tianjin Guangxia's extraction product exports, which yielded "huge profits" in 1999 and 2000, are pure fiction. The whole thing -- from the export of bulk extractive products to the soaring profits of Yinguangxia to the outrageous rise in its share price -- is a complete scam.

The Yinguangxia Trap

In the past two years, Guangxia (Yinchuan) Industrial Co Ltd (Yinguangxia, Shenzhen Stock Exchange code 0557) has created a jaw-dropping performance and share price myth.

According to Yinguangxia 1999 annual report, Yinguangxia's earnings per share that year reached an unprecedented 0.51 yuan; its share price is prophetic, from December 30, 1999 13.97 yuan to start, all the way up, to April 19, 2000 rose to 35.83 yuan. The next day after the implementation of a generous dividend program 10 to 10, that is, into the filling of stock options, on December 29, 2000, completely filled and hit a new high of 37.99 yuan, equivalent to the ex-rights before the price of 75.98 yuan, compared to a year ago when the start of the price of 440%, compared to 1999, "5-19 market" Launched before the rise of more than 8 times; 2000 annual gain ranked second in the Shenzhen and Shanghai markets; 2000 annual report disclosed the performance of the "miracle", in the share capital doubled based on earnings per share climbed to 0.827 yuan.

"Miracle" does not end here. March 1, 2001, Yin Guangxia announcement, said with the German integrity of the company (Fidelity Trading GmBH) signed a three consecutive years a total of 6 billion yuan of extractive products ordering total agreement. Based on this contract alone, the 2001 Yinguangxia earnings per share will reach 2 to 3 yuan! Earlier, Zhang Jisheng, chairman of the board of directors of Yinguangxia, predicted that it would be "no problem" for the company to double its earnings every year for the next three years.

It's a bright future, but not everyone is dazzled by it. Within the securities industry, not as many people believe in the myth of Yinguangxia as they thought.

-- One fund manager said, "[Yinguangxia's performance] is good but not common sense."

--A researcher in agriculture at a leading securities firm has not put Yinguangxia on watch for a long time, and when asked why, replied, "Is there a need to study it?"

There is a supercharged debate on securities Web sites with clear-cut views. In the famous securities chat room "Hutchinson Talk," there are thousands of posts about Yinguangxia, with skeptics and supporters each arguing their own side of the story. You can find all kinds of rumors there.

But just based on "feelings", rumors, arguments, and even "common sense", or lack of basis. Reporters after more than a year of tracking interviews, gradually approaching the truth, Yin Guangxia's "myth" is gradually restored to its true color. Even in the immature Chinese market is also quite rare in the oversized counterfeiting scam, showing in front of us.

Introduction

The miraculous turnaround of Yinguangxia's performance started in 1998. This year, Yin Guangxia from Tianjin, "good news".

June 17, 1994, Guangxia (Yinchuan) Industrial Co., Ltd. listed on the Shenzhen Stock Exchange under the name "Yinguangxia A". Yinguangxia A is said to be the first listed company from Ningxia, but in fact, the company first originated in Shenzhen.

Chen Chuan was the founder of Yinguangxia, and before his death in February 2000, he was the chairman of the board and president of Yinguangxia. Born in 1939, he was a scriptwriter for the Yinchuan Drama Troupe in his early years, and in July 1984 he moved south to Shenzhen to start his own business, founding the Shenzhen Guangxia Culture Company and the Shenzhen Guangxia Video Equipment Company, among others.

Chen Chuan, a man of letters and, according to those who met him, "a charismatic leader," was instrumental in the merger and reorganization of several floppy disk manufacturers under the banner of Guangxia Culture from 1993 to 1994, which led to a successful IPO (see the supplemental article, "Prequel to Yinguangxia"). Two of these enterprises, both in Shenzhen, were Guangxia Video Equipment Co. and Guangxia Miniature Floppy Disk Co. The other was called Guangxia (Yinchuan) Magnetic Technology Co. The company was registered in Yinchuan, the existence of only one year, from September 1992 to 1993 after the establishment of the silver Guang Xia that is canceled. The discerning eye knows that the function of this company lies in obtaining the listing quota of the Ningxia Autonomous Region. One of the initiators of the company is the Ningxia Computer Technology Research Institute, and the current chairman of the board of directors of Yinguangxia, had long served as the president of Yinguangxia Zhang Jisheng, that is, served as the director of the Computer Research Institute. Born in 1946, Zhang Jisheng, in addition to his position at Yinguangxia, also serves as director of the Science and Technology Department of the Ningxia Autonomous Region.

After the IPO, YGX's top management team around Chen Chuan gradually took shape. Li Youqiang, now president of Yinguangxia, is from Tianjin. He was born in 1941, was the director of the Tianjin Arts and Crafts Factory, as early as 1985, and Chen Chuan together with the business, in 1994 after the entry of Yinguangxia Tianjin, long-term responsible for the business in Tianjin. While Ding Gongmin, who holds a number of positions such as chief financial officer, chief accountant and secretary of the board of directors, is based in Shenzhen.

When the company went public in 1994, competition in the domestic floppy disk industry was in full swing, and in the blink of an eye, it was losing 2 cents for every floppy disk produced. For Yinguangxia, whose main business is floppy disks, the transition was imminent.

Since then, Yinguangxia has been struggling to maintain a 10 percent return on net assets every year. Chen Chuan, then chairman of the board of directors, has never been shy about this, and has mentioned it every time he recalls and describes Yinguangxia's entrepreneurial journey. Yinguangxia's projects changed one after another, and after the production of floppy disks, Yinguangxia entered the stage of comprehensive diversified investment, and the annual report of 1996 said that Yinguangxia had "successfully developed from a single industrial company with three floppy disk manufacturers at the beginning of its establishment to a cross-industry industrial company with 27 wholly-owned and holding subsidiaries and branches. ", to 2000 even more developed into more than 40 equity participation, holding company of the complex scale, from toothpaste, cement, marine products, liquor, oxalis, activated charcoal, cultural industries, real estate, to wine and ephedra, most of the project is a shot for a place, profitability has always been impressive, each time only to maintain a return on net assets of 10% of the allocation of stock just above the lifeline.

Yingguangxia's best-known project is the treatment of sand and grass in Yongning County, southwest of Yinchuan, West Shawo (now known as the levy of sand canals.) In 1995, Chen Chuan met Wu Anqi on a train to Beijing. Wu is the director of the Ningxia Autonomous Region Water Research Institute, has been studying the governance of the desert on the basis of hydrological research, has been 1200 acres of desert governance in the vicinity of Yinchuan, and then gave up due to lack of funds. A conversation on the train, Chen Chuan Wu sand and planting ephedra concept of interest and then decided to invest. Yin Guangxia invested 80%, the Institute of Water Science technology investment of 20%, set up the Guangxia (Yinchuan) Natural Products Company, purchased and managed more than 20,000 acres of desert in the outskirts of Yinchuan, and planted ephedra (ephedrine raw materials). Wu is currently the chairman of Guangxia (Yinchuan) Natural Products Company and Ningxia Guangxia Pharmaceutical Factory, and is also one of the directors of Yinguangxia.

The treatment of sand and grass has brought an unusually favorable image to Yinguangxia, but it has not brought much benefit. Yinguangxia claims to have invested over 600 million yuan before and after, an exaggerated figure. According to Caijing, the actual investment is about 90 million yuan. This project is said to be flat in the near future, but it is too early to contribute huge profits.

The miraculous turnaround in Yinguangxia's performance began in 1998. In this year, the Yin Guang Xia from Tianjin, "good news".

Tianjin Guangxia "sole support for the big picture".

In 1999, 75% of YGX's profit came from Tianjin Guangxia; in 2000, the percentage was even bigger

YGX set up a subsidiary in Tianjin in 1994, Tianjin Cleaning Products Co. The company once in 1996 through the German West - Illes company (C.ILLES & CO.) imported a set of pump toothpaste production equipment, which can be found in the earliest dealings between Yinguangxia and the West - Illes company; thereafter, Yinguangxia from the West - Illes company ordered a set of 500 liters from the German company (Krupp Uhde) produced by the Wood Company (Krupp Uhde) of supercritical carbon dioxide extraction equipment. equipment from Krupp Uhde, Germany. This was the beginning of the legend.

In 1998, Tianjin Guangxia received its first order from Germany's Honest Trading Company. At that time, the cleaning company had changed its name on December 31, 1997 to Tianjin Guangxia (Group) Co.

An announcement issued by Yinguangxia on Oct. 19 of that year said Tianjin Guangxia signed an export supply agreement with Germany's Honest Company, under which Tianjin Guangxia would supply the German company with 50 tons of egg yolk lecithin produced by carbon dioxide supercritical extraction technology and 80 tons of cinnamon essential oil, cinnamon oleoresin, and ginger essential oil, ginger oleoresin products annually, amounting to more than 50 million marks. On June 12, 1999, a total order price of 56.1 million marks. June 26, a cargo ship carrying the first batch of agricultural products extracted from Tianjin Guangxia anchored off the port and sailed to Germany. This first batch of products exported, actually made a profit of more than 70 million yuan!"

In 1999, Yinguangxia's profits totaled 158 million yuan, 76 percent of which came from Tianjin Guangxia (according to an internal speech by Zhang Jisheng).

Subsequently, Yinguangxia announced that it would import two more 800-liter extraction lines from Germany, and later upgraded the plan to two 1,500-liter x 3 and one 3,500-liter x 3 lines. The planned production capacity is as much as 13 times the existing production capacity of Tianjin Guangxia! For a time, the market was abuzz with the prospect of windfall profits on display.

On the eve of the publication of the 1999 annual report, on February 14, 2000, Chen Chuan died of a sudden illness in Beijing at the age of 61 years. According to the announcement, the cause of death was "sudden myocardial infarction".

The death of Chen Chuan, the founder of the company, did not affect Yinguangxia's 2000 dream trip in the slightest. In the board of directors election on February 17, Zhang Jisheng succeeded as chairman of the board of directors, Li Youqiang, then chairman and general manager of Tianjin Guangxia, was promoted to president of the company. Then Yinguangxia announced its 1999 annual report, with a profit of 0.51 yuan per share and a dividend program of 10 to 10 for the first time in the company's history.

From Dec. 30, 1999, to April 19, 2000, less than half a year, Yinguangxia rose from 13.97 yuan to 35.83 yuan, and on Dec. 29, 2000, the company completely filled in the rights and hit a new high of 37.99 yuan, which is equivalent to a price of 75.98 yuan before the ex-rights price, a rise of 440 percent over the price of a year ago, when the company was launched.

In March 2001, Yinguangxia published its 2000 annual report, in the case of doubling the share capital, earnings per share increased by more than 60% to 0.827 yuan per share, the profitability of the strong, staggering.

The vast majority of the profits came from Tianjin Guangxia: Yinguangxia's annual income from main business amounted to 910 million yuan, with a net profit of 418 million yuan. Yin Guangxia January 19, 2000 announcement that year, Tianjin Guangxia to the German integrity of the company "exported" 110 million marks of ginger oil, cinnamon oil, lecithin and other "extracted products". On April 2 this year, the audit of its financial statements, Shenzhen Zhongtianqin CPA firm sent a letter to the reporter, said that year additional order supplementary contract *** total 210 million marks, the actual implementation of the contract for the year 2000 amounted to 180 million marks (about 720 million yuan). If projected on the basis of the profitability of extracted products provided in the 1999 annual report (sales revenue of 239.71 million yuan, operating profit of 158.92 million yuan, a profit margin of 66%), the profit created by Tianjin Guangxia in the 2000 fiscal year would have amounted to 470 million yuan.

More magnificent profit prospects ahead. In March this year, the silver Guangxia again announced that the German integrity of the company and the silver Guangxia has signed a three consecutive years, 2 billion yuan a year the total agreement. By this projection, in 2001 the silver Guangxia earnings per share will reach 2 to 3 yuan, which will make the silver Guangxia become "the best performance of the two markets but the lowest price-earnings ratio of the stock". The Yinguangxia saga has reached its peak. June 18, 2001: Yinguangxia announces that a 1,500-liter x 3 carbon dioxide supercritical extraction line has been completed in Wuhu City, Anhui Province.

Impossible output, impossible price, impossible products

First, with the capacity of Tianjin Guangxia's extraction equipment, even if it operated overnight, it could not produce the amount it claimed; second, the export price of Tianjin Guangxia's extraction products was so high as to be almost absurd; third, some of the products in the export contract between Yinguangxia and Germany could not be extracted by the CO2 supercritical extraction equipment at all. Extraction

If Yinguangxia's performance is a myth, then "carbon dioxide supercritical extraction" -- a technology referred to by an unfamiliar, jargon-ridden term -- has turned it into gold. The simple explanation is that it is a technique for extracting natural raw materials based on the properties of carbon dioxide at different temperatures and pressures (see below for a description).

Hearing about the Yinguangxia myth, Zhu Shenlin, a professor at Tsinghua University's Department of Chemical Engineering, and Dai Zhicheng, general manager of Beijing Xinglong Biotechnology Co. Experts know that the application of this technology may be able to achieve a relatively healthy return, but never to profiteering, and is by no means omnipotent extraction. As early as December 1998, China Supercritical Fluid Association held in Guangzhou, near the end of the national annual meeting, specifically in the minutes of the meeting added this paragraph: "I hope that the business community of supercritical extraction projects do not blindly on the horse, low-level repetition." However, it was in this year that preparations for the Yinguangxia myth were launched.

There is reason to believe that the Tianjin Guangxia side, especially the former chairman and general manager of Tianjin Guangxia, the current president of Yinguangxia Li Youqiang in the whole process played a fairly key role. The reporter once asked Chen Chuan's original secretary about German customers and extraction, and she had only one thing to say: ask Li Youqiang. The answer from West-Ellis was the same.

In the eyes of experts and peers, the amazing benefits that Yinguangxia has achieved with this are suspect everywhere.

First, with the capacity of Tianjin Guangxia's extraction equipment, even if it operated all night, it could not produce the amount it claimed.

Even according to the contract amount announced by Yinguangxia on Jan. 19, 2000, the products included in the 110 million marks should be at least 100 tons of lecithin and 160 tons of ginger essential oil. As evidence of this, Tianjin Guangxia claimed to have exported DM 56.1 million worth of goods in 1999, including 50 tons of lecithin and 80 tons of ginger oil.

But based on what domestic experts know about the technology, a 500-liter x 3 CO2 supercritical plant could never actually produce more than 20 to 30 tons a year - even if it operated 24 hours a day.

Perhaps to make it "logical," Li Youqiang told reporters in Yinchuan in March 2001 that Tianjin Guangxia had mastered the special technology and could dramatically increase production capacity. He extracted egg yolk lecithin as an example, Tianjin Guangxia 500 liters × 3 equipment has been shortened extraction time from 10 hours to 3 hours and further shortened to 30 minutes; in the future, through a set of "on-line monitoring" equipment, but also will shorten the extraction time to more than ten minutes; and, Tianjin Guangxia production of egg yolk lecithin accuracy has been increased from 35% to 97%. Plus, Tianjin Guangxia is "four shifts and three runs" working day and night, the output is naturally amazing.

"30 minutes"! All the experts who heard this claim were incredulous. The extraction process includes pressurizing the carbon dioxide, extracting it, and releasing the pressure. Just to pressurize carbon dioxide to dozens of atmospheric pressure this step, it will take at least 40 minutes; extraction of lecithin, the amount of time necessary is five or six hours. The lecithin extracted in only 3 hours will be much less accurate. What makes Yinguangxia able to extract lecithin in 30 minutes? Li Youqiang's answer is a story: "I have this technology is the guys and the Germans dinner, he got drunk, get a top secret drawings - 'carbon dioxide under any conditions of the critical state.' The Germans sell you the equipment, but there's no way this stuff is going to be given to you. By the time our lecithin was made, even the Germans were surprised. The German was later demoted from headquarters for it."

The reporter went to the Department of Chemical Engineering at Tsinghua University -- a "partner" Li once mentioned -- for further verification. Prof. Yang Jiqi laughed at the news: "I have a lot of drawings like this here, do you want it? That's just a basic technical explanation drawing."

Yang Ji is a professor at Tsinghua University's Department of Chemical Engineering, one of the three main experts at Tsinghua University who researched supercritical extraction technology. He began researching supercritical technology in 1978, and has had extensive cooperation with the business community, and is known as the industry's "living dictionary".

Professor Li Shufen of Tianjin University, who has been in contact with Yinguangxia, also told reporters that the extraction of egg yolk lecithin, three hours is "God's speed", and 30 minutes "is a miracle".

Professor Chen Kaixun of Northwestern University pointed out that Li Youqiang, so-called production time will eventually be reduced to ten minutes of "online monitoring" equipment, but only research literature on the claim that the detection means of a kind of carbon dioxide extraction has nothing to do with the carbon dioxide.

In short, it was technically impossible for Tianjin Guangxia to produce the contracted quantities within the scheduled time.

Second, the export price of Tianjin Guangxia's extracted products was so high as to border on the absurd.

At a seminar on supercritical extraction with carbon dioxide held in March 2001 before Yinguangxia's shareholders' meeting, Li Youqiang said: "Take ginger as an example, 50 kilograms of dried ginger with a moisture content of less than 10 percent can produce 1 kilogram of oil and 1 kilogram of oil-containing resin. The best domestic dried ginger from Shandong is 7,000 yuan per ton, but the 'price in the European market' is 700 to 900 marks per kilogram of ginger essential oil (equivalent to about 2,800 yuan to 3,600 yuan), and each kilogram of oil-containing resin is 160 to 200 marks (equivalent to about 640 to 800 yuan), and the export price of Tianjin Guangxia is still in the middle to upper class. Add in labor, utilities, and machine depreciation, and you can do the math on profit margins."

Based on these conditions, it can be roughly calculated that the raw material cost of each kilogram of ginger oil and oleoresin combined is only 350 yuan, but "sold to the Germans", it can be sold for 3,440 to 4,400 yuan. The world can be such a beautiful thing! There is a huge gap between the selling price provided by Yinguangxia and the London price in the international market, and the reference price provided by many domestic manufacturers and industry experts. Ginger essential oil, for example, Yinguangxia announced the price is 2800 to 3600 yuan per kilogram, and November 17, 2000, the London market CIF price of 100 U.S. dollars / kg (equivalent to about 827 yuan / kg), Xi'an Jiade company to understand the international market price of only 600 to 800 yuan / kg, Beijing Xinglong Biotechnology Company Limited (the earliest domestic use of CO2) (the earliest producer in China to adopt supercritical extraction technology of carbon dioxide) even at the price of small batch production is only 1,000 to 1,200 yuan / kg, a price difference of 3 to 5 times! An expert who was informed of the price of silver Guangxia extracted products laughed and said: such an expensive ginger oil, simply comparable to gold, it seems to be used carefully with a dropper! According to the 1998 Tianjin Guangxia export contract to the German integrity of the company's goods, the goods contract price is as follows:

Cinnamon essential oil 900 to 1,100 marks / kg

Cinnamon oleoresin 160 to 200 marks / kg

Ginger essential oil 550 to 700 marks / kg

Ginger oleoresin 150 to 250 marks /kg

Egg yolk lecithin Average DM 300/kg

Approximately RMB 1.2 million/ton

In March 2001, Li Youqiang announced the following product prices in public:

Ginger Essential Oil DM 700 to 900/kg

Approximately RMB 2.8 million to 3.6 million/ton

Ginger Oil Resin 160 to DM 200/kg

Approximately RMB 640,000 to 800,000 yuan/tonne

Cinnamon oil 700 to DM 1,100/kg

Approximately RMB 2.8 million to 4.4 million yuan/tonne

Cinnamon resin 200 to DM 500/kg

Approximately RMB 800,000 to 2 million yuan/tonne

Either of the above prices is substantially overestimated when compared to actual market prices both domestically and internationally.

Third, some of the products in Yinguangxia's export contracts to Germany simply cannot be extracted with carbon dioxide supercritical extraction equipment.

According to experts, carbon dioxide supercritical extraction technology has a major limitation in that only fat-soluble (also known as nonpolar and weakly polar) substances can be extracted from it, and it often needs to be combined with other technologies to produce products with higher precision.

Tianjin Guangxia claims that the precision of its egg yolk lecithin has increased from 35 percent to 97 percent. However, an expert told reporters that Tianjin Guangxia's 500-liter x 3 set of extraction equipment alone is unlikely to extract lecithin with a precision of more than 30 percent, and must be accompanied by a large amount of ethanol to carry out the purification of the latter part of the separation equipment, but Tianjin Guangxia doesn't have such equipment.

March 1, 2001, Yin Guangxia announcement, said with the German integrity of the company signed a 2 billion yuan per year, three consecutive years of total **** 6 billion yuan of the total supply agreement, the company needs to provide the German side each year cinnamon bark 150 tons of essential oils, cinnamon bark oil resin 150 tons, ginger essential oils 160 tons, ginger oil resin 160 tons, decaffeinated tea 9,000 tons, natural caffeine 157.5 tons, 24 tons of tea polyphenols, 24 tons of angelica root oil, 30 tons of ginkgo ketone esters, 26 tons of tannin, 15 tons of tanshinone, 10 tons of Pueraria lobata and other extracted products.

Some of the products mentioned in this contract, such as tea polyphenols, are water-melting (polar) substances, which cannot be extracted at all using carbon dioxide supercritical extraction technology. Ginkgo biloba ketone ester, geraniol and salvinorin mentioned in the contract are also very difficult to extract. This is the reporter interviewed many domestic experts such as Tsinghua University, Professor Yang Ji, China Chemical Industry University, Professor Yu Anping, Northwestern University, Professor Chen Kaixun, the unanimous opinion. 1997, Nanyang City, Henan Province, thought that the use of carbon dioxide supercritical extraction technology can be extracted from the leaves of the ginkgo biloba ginkgo biloba flavonoids, for which an investment of 20 million yuan, and 10,000 acres of farmland planted with ginkgo trees instead of the results of the project failed, the farmers had no income that year.

In addition, there are a lot of doubts -- Ginkgo biloba said, in 2000, the company exported more than 50 tons of lecithin to Germany, which requires at least thousands of tons of raw materials. But informed sources revealed that the yolk lecithin raw material yolk powder in the domestic only two production bases, respectively, in Shenyang and Xi'an, in fact, the two places together sold to Yin Guangxia yolk powder is only 30 tons.

The reporter also learned from Tianjin, a pharmaceutical company once wanted to supercritical carbon dioxide extraction equipment, but a senior management of Tianjin Guangxia privately told them that this move should be cautious, because Tianjin Guangxia "has been a long time can not open the work.

Another 3,500-liter x 3 production line planned for Wuhu will mainly process tea, according to Yinguangxia's announcement, providing the German company with 157.5 tons of caffeine, 24 tons of tea polyphenols, and 9,000 tons of decaffeinated tea as extracted products each year, which will require processing at least 27,000 tons of tea. Prof. Yu Anping and Prof. Yang Jiqi made their own calculations, and the conclusion was the same: a set of 3,500 liters × 3 equipment can only handle 6,000 to 7,000 tons of tea even if it runs 24 hours a day throughout the year! ...... The list goes on and on.

Another fate for Guardian

Why is it that the same equipment that produces huge profits at Yinguangxia contributes so little at Guardian?

So far, only three companies in China have purchased CO2 supercritical extraction equipment made by Germany's Wood, in addition to Tianjin Guangxia (500 liters x 3, introduced in 1999), Xi'an Jiade (500 liters x 2, introduced in 2000), and Guangzhou's Nanfang Flour Mills (250 liters, introduced for its own use in 1995). in December 2000 the National In December 2000, the annual meeting of the National Supercritical Fluid Extraction Society was held in Yangling, Xi'an, and the sponsor was Guardian.

Despite this equipment, Xi'an Jiade has not had a good time. This puts pressure on Yinguangxia as well: it has to be explained why the same equipment that makes huge profits in Yinguangxia makes a lackluster contribution in Jiade. In July 2000, Zhang Jisheng mentioned for the first time to reporters that there was another carbon dioxide supercritical extraction line in Xi'an, also imported from Germany's Wood, but it had been idle.

In March 2001, Li Youqiang claimed in an exclusive interview that Xi'an Jiade was struggling because it didn't have the know-how to master the equipment, and that Yinguangxia was considering whether to buy it. Yan Jindai, the current general manager of Tianjin Guangxia, also said in an interview that Jiade's mastery of extraction technology was too little, the main reason for its very different fate from that of Yinguangxia.

These claims were reported by the media and had a big impact on Guardian. Because at this time Guardian was in the process of attracting capital. Yinguangxia's statement put it in a passive position.

Garder was indeed in some kind of predicament at this time: it introduced the equipment in May 2000, and has failed to open up the market since its successful test run in July. Like Yinguangxia, Jiade also imported the carbon dioxide supercritical extraction equipment from Germany's Woodward through Tao Peng, the business manager of Jiegao, the Chinese arm of West-Ellis. Compared with Tianjin Guangxia's equipment, the structure is almost identical, except for one less kettle (the vessel used for extraction).

Garder also signed a protection contract with West-Ellis: "West-Ellis shall not sell and install similar equipment in Shaanxi province within three years." The bottom line is that Guardian and West-Ellis signed a contract for at least 70 percent of the product to be underwritten by West-Ellis, with a guarantee from Deutsche Bank.

But this underwriting clause has never been honored. Tao Peng promised several times to bring German customers to Jiade, but never did. West-Ellis has promised that Jiade can get 10 percent of the price of the equipment, or more than 400,000 marks of liquidated damages, in accordance with the contract, on condition that it will no longer be legally liable.

The reporter learned that, compared with the mysterious closed style of Tianjin Guangxia, Jiade company from the beginning of the Department of Chemical Engineering with Northwestern University Professor Chen Kaixun has a comprehensive technical cooperation, in a variety of products on the test run and market research up and down a lot of work. In the case of the underwriting agreement is difficult to fulfill, the company carefully produced a variety of samples, but also did a lot of marketing efforts, including the German side, but all of them fell into oblivion. Guardian concluded that the problem was not the technology, but the difficulty in opening up the market.

Why did West-Ellis, on the one hand, prefer to sacrifice millions of dollars in liquidated damages rather than underwrite Guardian's products or introduce customers, while on the other hand, it introduced such a big customer as Honest Company for Tianjin Guangxia? This is something Guardian has never been able to figure out.

"We don't have any 'secret weapon', and I don't envy your secret weapon, but I at least know exactly how much this equipment can produce. I don't care what you say outside, but if it involves Guardian's interests, we won't be silent forever." Guardian chairman Li Ting said.

Mystery of the German client

German Integrity, which contributed the bulk of Yinguangsha's profits in 1999 and 2000, is neither a subsidiary of West-Ellis, as Yinguangsha claims, nor a veteran company that has been established for 160 years. It was founded in 1990, with a registered capital of only 100,000 marks

Yingguangxia's "secret weapon", if any, in addition to its "know-how", I'm afraid it is a large amount of German customers. From the West-Ellis to the integrity of the trade, in fact, who are the gods? For Yinguangxia 1999, 2000 profits made a huge contribution to the German integrity of the company's full name in English: Fidelity Trading GmbH. this company, although according to Yinguangxia's statement has a huge amount of trade with China, but there is actually no office in China, in the Internet can not find the slightest information.

Yingguangxia in March 2001 at the shareholders' meeting distributed materials, "Germany's Fidelity Trading GmbH is registered in Germany, a well-known trading company, is a subsidiary of the German West-Ellis, was established more than 160 years of history. It is a trading company specializing in biopharmaceutical, food and medical ingredients and is a reputable and well-established company in Europe."

Germany's West-Ellis is indeed a trading company with a long history, and it was through West-Ellis that CO2 extraction equipment made by Germany's Wood was sold to Yinguangxia. But is the integrity of the company is its subsidiary? Reporters have repeatedly to the German West-Ellis in China institutions Jiegao company to verify this matter, but the company's receptionist's attitude is very ambiguous, a time to say that the integrity of the German company, a time to say that the integrity of the company and the West-Ellis has a relationship with a time to say that the integrity of its subsidiaries. Finally, it is surprising to repeatedly ask the reporter to ask Yinguangxia! Integrity and West-Ellis relationship how can Yin Guangxia to confirm it? In a telephone interview on July 16, Jetco's key figure in the relevant business, Tao Peng, clearly told reporters: integrity is just a company registered in Germany, and West-Ellis has business dealings, but is not a subsidiary of West-Ellis.

The problem is not really complicated. It is known that in May 2001, at a routine pre-editorial meeting of the China Securities Journal, its editor-in-chief mentioned that since Yinguangxia raised so many questions, why not use the power of the Xinhua News Agency's branch office in Germany to investigate its background? Since then, whether the newspaper really went to Germany to investigate is not known, but did have a Xinhua News Agency foreign correspondent in Germany to inquire about the local checking desk, but the company did not have a phone number registered.

The reporter learned that the head office of the Industrial and Commercial Bank of China investigated the integrity of the company through its overseas branches, and found the following record in the German Chamber of Commerce in Hamburg: "Fidelity Trading GMBH was registered in 1990 in the Chamber of Commerce, with a registered capital of 51,129.19 euros (about 100,000 marks), the person in charge is Kiaus Landry, and its main line of business is mechanical products and technical consulting."

The registered capital of a few tens of thousands of marks is not outrageous for a trading company, but after all, it signed a contract with Yinguangxia for an annual amount of up to 2 billion yuan and a total of 6 billion yuan, which is too much of a contrast. After this investigation, the head office of the Industrial and Commercial Bank of China (ICBC) did not resume lending to Yinguangxia. The head office of ICBC had signed a working capital loan contract with Yinguangxia on December 29, 1999, with a borrowing amount of RMB 200 million yuan and a term from December 29, 1999 to October 28, 2001 set. In April and May of this year, the Industrial General Bank suspended the loan early.

Yingguangxia's foreign spokesman Ding Gongmin had promised reporters that in April this year, when Wuhu's extraction production line was completed, the German integrity of the company will come to China to sign this year's supply contract (2 billion per year, 3 consecutive years, part of a total **** 6 billion of the total agreement). Interview this company at that time, any doubts will be solved.

Until June 18 this year, Wuhu, Anhui Province, 1,500 cubic liters × 3 of carbon dioxide supercritical extraction production line is finally test run when the long-awaited representatives of the German integrity of the company still did not appear. People attending the commissioning ceremony saw a few tall Germans, but that is the Wood company sent engineers, and the ordering contract has nothing to do. The day after the ceremony, Li Youqiang flew to Germany for unknown reasons.

Is it true that the truth can never be known if people from honest companies don't show up?