Xinwei Group created a sensational scandal when it failed in its promise to build a navigable waterway through Nicaragua that would have rivaled the Panama Canal in size.
In 2012, Wang initiated contact with Nicaraguan authorities to discuss getting permission to build a Nicaraguan canal. Meanwhile, Xinwei Group formed a private company in Hong Kong, HKND Group, which would oversee the build of this major canal.
In July of 2013, The Telegraph reported on Wang’s plans to build the 170-mile Nicaragua Grand Canal, which would connect the Pacific Ocean and the Caribbean Sea. The $40 billion venture was touted to challenge the eighth wonder of the world—the Panama Canal’s monopoly on shipping in Central America—and forever change international shipping routes.
Wang’s canal idea was not new. In 1567, King Philip II of Spain proposed the same idea and conducted site surveys for the project. Then during the early part of the 19th century, the French Emperor Napoleon III proposed a similar project for the region.
Even the U.S. government considered building a canal through Nicaragua at the start of the 20th century, but then abandoned those plans after negotiating with the French to purchase and complete their work on the Panama Canal. There would be no further talk about a Nicaraguan canal until Wang’s canal route plan was approved in 2014.
Wang’s plan was to complete the Nicaraguan canal within 5 years. After which, the main investor HKND Group would be granted rights to use the canal and its facilities for 100 years. In the meantime, over 400,000 jobs would be created, but this would not prevent local members of the South Atlantic Autonomous Region from protesting and saying: “Our land is not for sale and will not be given away,” “Chinese people get out,” and “No canal.”
Despite the public protests, the Nicaraguan government agreed to proceed. Wang increased the canal’s total investment to $50 billion. On the day construction began, the world watched as Wang and Nicaraguan President Daniel Ortega were photographed cutting the ceremonial ribbon.
The project did not evolve as was initially hyped. A few years later, BBC reported the $50 billion project employed fewer than 30 people and had only built a dusty trail of about 10 kilometers. What was once an engineering phenomenon had become the scam of the century.
After concluding the Nicaraguan canal agreement in June 2013, the Xinwei Group began to leverage the project’s growing prestige to attract investors and shell listings. In September 2013, it announced a shell listing of the Beijing Zhongchuang Telecom Test Co., Ltd. for a total consideration of $4.2 billion. Over the next two years, its market value exceeded $31 billion and it was listed on the SSE 50 Index.
Wang profited handsomely as well. According to Forbes China, Wang’s 1.01 billion shares in the Xinwei Group grew to $6.6 billion in 2014, making him one of China’s top billionaires. The Xinwei Group enabled three additional Chinese investors to become billionaires, including Jiang Ning, Wang Yongping, and Wang Qinghui.
The Xinwei Group’s initial appeal would eventually evaporate due to its weak foundation, mysterious dealings, and lack of transparency. The group was originally formed in 1995 by Datang Telecom, a Chinese state-owned entity. It didn’t do well financially and was then acquired by Bonade Investment Company, which declared Wang as the principal shareholder. Since then, the owner of Beijing Changping Bathhouse, a drop-out from Jiangxi University of Traditional Chinese Medicine, transformed into the chairman of Xinwei Group.
After taking over as chairman for the Xinwei Group, Wang claimed the company had turned a loss into an $88.4 million profit due to a large order of $466 million from Cambodia. But an investigation report by NetEase Finance in 2016 “Xinwei Group’s Surprising Game: Hiding Huge Debts and Mysterious People Cashing Out,” said Wang’s report was fraudulent. The profits he reported were based on an illusion created by Xinwei Group and its subsidiary, Cambodia Xinwei.
The investigation discovered the subsidiary (Cambodia Xinwei) agreed to order $466 million in products from the parent (Xinwei Group). The parent used the order as collateral to obtain a $466 million loan from the China Development Bank. The borrowed funds were then used by the subsidiary to fund its order from the parent. This is equivalent to using the guarantee for revenue.
Relying on the same fraudulent business model used in Cambodia, Xinwei Group began expanding its operations into Ukraine, Russia, Tanzania, Nicaragua, and others.
Meanwhile, Wang used international hot projects to grab public attention within China. For example, Wang was instrumental in forming Beijing Skyrizon Aviation, a company that was sanctioned by the United States for attempting to acquire a Ukrainian aviation engine company. Other projects included building a deep-water port in Crimea, acquiring an Israeli satellite company, and getting involved in overseas security. Wang even threw out the idea of an “air and space information network,” with the intent to launch one rocket that can carry four satellites within three years, and by 2019, to launch 32 or more satellites to form a satellite communication system covering the world. These hot projects and dreams, made media and investors excited and helped the company to obtain new loans to pay back the old debt.
NetEase Finance confirmed that Xinwei Group’s apparent growth was based on lies and fraudulent practices. In fact, the company was heavily indebted and had enabled many of its mysterious shareholders to reduce their holdings or cash out their shares before any problems were exposed. Specifically mentioned were investors Wang Yongping, who salvaged $35.38 million; Wang Qinghui, who obtained $26.85 million; and Lu Dalong, who picked up $19.24 million. Wang Jing had personally received at least $1.6 billion in cash in 2017.
On July 12 of 2019, Xinwei Group’s trading was overturned after more than 900 days of suspension. After falling for 36 consecutive days, the company set a record for consecutive A-share losses, with market value evaporating nearly $29.5 billion. Over 150,000 of its shareholders were hurt by a per capita loss of $37,000, yet 120,000 shareholders remained on Xinwei Group’s list of investors as of the end of March 2021.
It’s alleged that Wang has disappeared after pledging 35 percent of his Xinwei Group shares to major Chinese financial and securities companies, including China Development Bank and Shengjing Bank.
The scams perpetrated by Wang created havoc and financial ruin for thousands of people in China and around the world. It also brought suffering for the Nicaraguan people. The Nicaraguan government still holds the land and land development rights that were forcibly expropriated for the canal construction, and local residents are still upset with having been evicted from their property. Many landowners were incarcerated, injured, or killed during conflicts with the police and government authorities.
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