China retail investors lose life savings due to defaults

More than 100 investors plead with trusts and government offices for repayment

Ms Lulu Fang, the owner of a small trading company, said she lost her life savings of 15 million yuan (S$2.8 million) when she bought so-called trust products tied to Guizhou province in the south-west of China.

The 60-year-old was counting on a stable return of about 8 per cent, much higher than what she would earn from depositing the funds in a bank. Instead, her investment was wiped out when the products defaulted in 2023.

Faced with possible foreclosure on her apartment in Shenzhen due to her failure to make mortgage payments, she joined more than 100 other investors on multiple trips to the trusts and government offices to plead for repayment.

"My life is a total mess now," she said. "I have worked my entire life and put all the money I saved for retirement into the products. I was told these were safe. That was a lie."

Defaults in an opaque corner of China's local debt market have surged to a record high, ensnaring investors who had assumed the securities had an implicit guarantee from the state.

It was not supposed to be this way. In 2023, confronted with a wave of bad debts issued by municipalities' financing arms, the central government took action.

It gave local governments permission to raise around 2.2 trillion yuan in new bonds to help repay creditors, and ordered state banks to provide additional refinancing support. The measures drove borrowing costs to a record low and investors rushed back into the market, clamouring to buy bonds and loans.