More garment makers in Fujian province are in trouble after the owner of a high-end menswear company absconded with a large sum of money.
Banks have suspended lending to the industry since the boss of Hoperise fled, leaving behind an undetermined amount of debt.
The latest incident involved the chairman and chief executive of Hong Kong-listed Fujian Nuoqi Co. (01353.HK), according to 21st Century Business Herald.
Meanwhile, Eratat Lifestyle Ltd. has been out of operation for the past two months and its 2,000 employees are owed salaries going back to late 2013. Its senior managers have disappeared, the report said.
Eratat, which was established in 1983, listed on the Singapore Stock Exchange in 2008. It owns two menswear brands.
Fallout from the Fujian Nuoqi fiasco continues to ripple across the industry.
On July 31, the company said it found chairman and chief executive Ding Hui had transferred 228 million yuan (US$37 million) from its bank account in Hong Kong to two different accounts between January and April this year.
Nuoqi reported the transfers to the Ministry of Public Security and the Hong Kong police and said its operations are normal.
More than 5,200 industrial companies in Fujian had sales of 20 million yuan or more as of November 2012. Half of them are traditional garment and footwear firms.
However, many of these firms have grappled with various challenges in recent years.
Some have raised money from the stock market but the funds have not been enough to offset their debt.
In addition, they continue to use an expansion model combining offline stores with advertising against a growing trend toward online shopping.
Also, prohibitive bank loans are exacerbating their financial difficulties. Interest rates to traditional garment and footwear firms are up to 7 percent in the shadow-banking market.
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