In recent times, former employees of Huoqiao City Group, a large state-owned enterprise with ties to the Chinese Communist Party, have come forward to the media to report that under the company’s “mandatory” co-investment system, substantial personal funds have been trapped in real estate projects that are either stalled or facing difficulties in liquidation. Even after being laid off, these funds remain difficult to retrieve, sparking widespread concern.
Former employee Wang Tian (pseudonym) of Huoqiao City Group shared with Nandu Wancaishe that he had invested 80,000 yuan in a company project in 2021, only to be unexpectedly laid off in 2024. Despite leaving Huoqiao City, his remaining co-investment principal is still held in the company’s account, and he can only wait for the refund according to the original co-investment rules, causing him considerable anxiety and powerlessness.
“Even though I have terminated my employment with the company, I still have to wait for the long refund process as per the original rules,” Wang Tian said. Unemployment has already made life difficult for him, and the co-investment funds were savings accumulated over the years by himself and his colleagues, some even borrowed, now trapped, adding to their distress. They attempted to seek legal recourse to protect their rights, but the court did not recognize the “mandatory co-investment” as reaching the level of “dismissal if not co-invested,” thus hindering their efforts to seek justice.
Reportedly, Huoqiao City’s co-investment system was initiated in 2019 with the publication of the “Shenzhen Huoqiao City Co., Ltd. Project Co-investment Management Measures,” which clearly stated that “in principle, all investment projects must implement co-investment.” Co-investment personnel include project company executives, department heads, key personnel nominated by project company leaders, among others. Other project company employees and those from secondary units can voluntary participate in co-investment.
Of particular note is a circulated online document titled “Huoqiao City Group Limited Project Co-investment Management Measures” which outlines penalties for failure to meet payment deadlines, with co-investors at risk of losing their co-investment status or facing deductions in performance evaluations. Wang Tian confirmed the authenticity of this document, lamenting that despite investing 80,000 yuan, he has only received 9,000 yuan back so far. With the real estate market showing signs of decline when he participated in co-investment in 2021, some colleagues were reluctant. However, working in a state-owned enterprise, not participating could lead to conflicts with the company, affecting performance and possibly resulting in job loss. “At that time, I just wanted to keep my job in a state-owned enterprise, so I chose to co-invest,” Wang Tian said.
According to Huoqiao City’s Project Co-investment Management Measures, up to 80% of the co-investment principal can be returned to employees once the overall project cash flow turns positive. Any remaining co-investment principal is to be refunded upon project completion.
Wang Tian expressed pessimism, stating, “With the current poor real estate market, when will we reach this (90%) selling rate? Moreover, some projects have already been halted, making it impossible to reach the peak funding, meaning the principal will never be recovered.”
Facing a sudden downturn in economic situation after being laid off, former employees who participated in co-investment with the group hope to retrieve their co-investment funds. They believe that co-investment was not voluntary and that the company should be held responsible. Furthermore, Huoqiao City Group introduced new co-investment management measures in 2023, explicitly stating that they “allow co-investment withdrawal for employees who passively or voluntarily leave.”
However, the implementation of this new policy has faced challenges. Former employees state that despite the supposed option to withdraw, the process is cumbersome in practice. Their core demand is for a “graded approach”: prioritizing the return of co-investment capital for laid-off employees, while offering a temporary postponement for current employees to “alleviate social conflicts and demonstrate the responsibilities of state-owned enterprises.”
Huoqiao City’s reluctance to support these demands has led former employees to question the company’s lack of compassion, highlighting deep-seated management issues within the company. Especially criticized is the current leader Zhang Zhengao’s “lean management” approach, which has resulted in a reduction of nearly 5,000 employees within three years at Huoqiao City. Some of these dismissed employees were participants in the coercive co-investment scheme.
In response to the issues raised by former employees, Shenzhen Huoqiao City Co., Ltd. stated in an interview with mainland media that real estate project co-investment is a legal and compliant practice, with accounting procedures following relevant guidelines.
Huoqiao City stated that co-investment is essentially an “investment behavior” aimed at promoting shared benefits and risks between employees and the company to motivate staff. Whether employees are employed or have left, they will share profits when projects succeed and bear risks when they fail. The company emphasized its high regard for employee concerns, commitment to close communication, and continued efforts to effectively advance related work.
In fact, the issues exposed by the real estate co-investment system extend beyond just Huoqiao City. Bai Wenxi, Vice Chairman of the China Enterprise Capital Alliance, pointed out that common problems include many companies linking co-investment to promotions and bonus distributions, creating a form of coercion. Projects being halted, slow sales, and misappropriation of presale funds have made it challenging for employees to receive their principal on time. After being laid off or leaving the company, employee benefits are left hanging, preventing them from participating in project decisions or effectively seeking recourse through internal channels.
Bai Wenxi believes that the fundamental reasons behind these issues lie not only in the cyclical downturn of the real estate market but also in inherent flaws of the co-investment system itself—lacking information disclosure, exit mechanisms, and dispute resolution arrangements, problems that were overshadowed by high growth during prosperous times but glaringly exposed during downturns.