YinGuangXia Events

--China's enron events

Background
• Guangxia(Yinchuan) Industrial Co., LTD ， short title
“ YinGuangXia ” ,listed on the stock exchange in shenzhen,
stock code 000557, which is the first listed company in
ningxia hui autonomous region.
• On November 26, 1993, in the approval of the ningxia hui
autonomous region economic system reform commission,
the ministry of foreign trade and economic cooperation and
the China securities regulatory commission, YinGuangXia
issued to social public stock 74,000,000 shares.
• On June 17, 1994, the company stock listed for trading in
the shenzhen stock exchange.
• End in 28 February 2007 ， the company’s total capital is
605,007,626 yuan.
 Business Scope of Company
• Development, production, sales of
high-tech product;
• Developing, processing, marketing
of natural products;
• Animal and plant breeding, planti
ng,processing,marketing;
• Development,production,marketing
of food,daily chemical products, w
ine;
• Real estate development, etc.
• Currently the leading industry of
the company is grape planting, pro
cessing, wine sales.
 Introduction of YinGuangXia Event
• YinGuangXia company’s whole name is GuangXia
(yinchuan) Industrial Co., LTD.Its securities referred to as
STYinGuangXia.It was known as “China's first blue chip”
because of its outstanding performance and tempting
prospects.
• On dec.30,1999, YinGuangXia starts its share price, which
rose six times within one year and became the most popular
stocks.In April 20,2000,YinGuangXia carried on the capital
reserve turn to equity scheme, every 10 shares turn into 20
shares.Also,it begins the
填权 on market quotation, annual price up 440%, and this
increase located in the 2nd place in shanghai and shenzhen.
At the same time,2000 annual report indicated the performanc
e synchronous growth,surprising the public again. On the
basis of double capital,EPS zoomed to 0.827 RMB, while
the vast majority of its profit comes from Tianjin
Guangxia:sales 9100 million RMB,net profit 418 million
RMB.
However, based on the so called increasing profit, many
media questioned by the booming increase of the share prices.
As early as march ，《 Securities market
weekly 》 and 《 The Financial Times 》 reported issues
written by PuShaoping,the analyst of SEEC, putting forward
9 doubts to its high-speeding increase and thick profits.
The critical strike comes from
《 Finance & Economics 》 journal .On
August 2001,
《 YinGuangXia trap 》 revealed the
high quality “blue chip”with high-
tech,west-developing and
environmental protection is a scam
from the very beginning.

After a series of detailed

investigation, 《 Finance &
Economics 》 finded out that “the
profit myth”diffused by YinGuangXia
from 1999 are completely
fabricated.
 Main Financial Indexes and Assets and Liabilities
EPS ROE INCOME PROFIT NET PROFET
earnings per net assets ( 万元 ) ( 万元 ) ( 万元 )
share income rate
(元) (％)

Mid 2001 一 0.039 —3.77 7 251 1 916 —1 953.36

2000 year 0.827 34.56 90 899 57 826 41 764.64
1999 year 0.510 13.56 52 604 20 858 12 778.66
1998 year 0.405 15.35 60 938 22 769 8 915.45
1997 year 0.225 10.10 32 432 5 086 4 663.60
1996 year 0.323 14.7l 42 951 4 573 4 722.65
1995 year 0.224 10.03 22 556 1 924 2 747.30
1994 year 0.295 15.52 10 635 957 2 181.30
1993 year 0.270 27.87 4 123 1 011
 The Balance Sheet
＼＼＼ year Mid 2001 Late 2000 Mid 2000 Late 1999
name ＼＼＼
total assets( 万元 ) 220 960.88 315 129.53 269 227.78 242 989.64
Current assets( 万元 ) 118 023.37 204 576.47 159 721.06 145 286.25
Account receivable ( 万元 ) 53 510.58 89 639.60 55 440.19 58 079.85
Net inventory( 万元 ) 42 183.10 39 482.56 46 191.20 40 311.06
Long-term investment ( 万元 ) 16 485.13 13 075.83 10 471.52 7 582.12
Fixed assets( 万元 ) 79 866.24 89 489.93 92 363.32 83 679.85
Intangible assets ( 万元 ) 6 586.14 7 987.31 6 671.89 6 441.43
Current liabilities ( 万元 ) 115 132.92 146 110.54 96 596.83 78 285.21
Long-term liabilities ( 万元 ) 48 990.60 33 888.81 44 517.69 52 229.93
stockholder's equity ( 万元 ) 51 846.90 120 852.81 110 295.86 94 246.00
Capital reserve( 万元 ) 21 469.86 21 469.86 21 469.86 46 732.93
Surplus reserve ( 万元 ) 15 948.42 15 948.42 7 595.49 7 595.49
Net assets per share( 元 ) 1.030 0 2.390 0 2.180 0 3.730 0
Adjusted net assets per share( 元 0.940 0 2.150 0 2.020 0 3.420 0
Shareholders' equity rate( ％ 23.464 38.350 40.967 38.786
Asset-liability rate( ％ ) 74.277 57.119 52.415 53.712
Accumulation fund per share( 元 ) 0.424 9 0.424 9 0.424 9 1.849 9
From the above YinGuangXia disclosure
information we chould see that the
company’s achievements continuate to
promote in the year 1999 and 2000.The
profits are mainly come from Tianjin
subcompany. Through faking purchase and
sales contracts, forging the export
declaration, faking value-added
tax,etc.,Tianjin subsidiary fabricated main
business income and profit 745 million
RMB,which includes 178 million yuan in
1999, 567 million yuan in 2000.

Meanwhile,they find out that Shenzhen

ZhongTianQin accounting firm and its
signature certified public accountants
violating applicable laws and
regulations,publishing false auditing
 The Disposal of YinGuangXia Events

• April 23,2002,CSRC released the punishment to

YinGuangXia.
• In view of existing “conceal important fact and
disclose information falsely ”, CSRC imposed a
fine of 600000 yuan,and order them to rectify the
situation.
 Punishment of The Accounting Firm
• In September 7,2001,  the Ministry of Finance released an
announcement about withdrowing practice qualification of
ZhongTianQin.
• The mistakes of ZhongTianQin lie in:
• When auditing financial reports,the accounting firm failed to
the confirmation for important accounts receivable,in
contrast,they sended the confirmation to YinGuangXia;
• What’s more,the accounting firm didn’t adopt analytical
auditing technology to test income cycling,cash&deposits with
banks,nor did they carry on the cost analysis and logical
analysis.