Apple reseller in China allegedly flees abroad with US$16m

Want China Times, Staff Reporter 2014-12-25

An Apple store in Nanjing. (File photo/CNS)

The head of an authorized Apple product distributor at the Zhongguancun electronic shopping mall in Beijing has allegedly fled to France with 100 million yuan (US$16 million) in borrowed funds, several other Apple authorized distributors in the mall told the Chinese-language Economic Information Daily.

Dong Wei, owner of Beijing Guangda Century Science and Technology, which resells Apple products in Beijing, is reportedly on the run with money borrowed from several state-owned banks, a financial guarantee company and pre-paid fees from more than a dozen of lower-level Apple-authorized distributors in Zhongguancun and Henan and Hebei provinces as well.

Dong's company was a major Apple distributor in Beijing and supplied its latest products to more than a dozen smaller distributors in Beijing and in Hebei.

Smaller distributors need to pay large down payments-sometimes totaling millions of yuan-to bigger distributors to obtain the newest products, such as the iPhone 6 series, the report said.

Some smaller distributors had already placed iPhone orders with Guangda Century and had paid about 60 million yuan (US$9.7 million) in prepaid fees to obtain the newest products, another distributor said. In response, Apple said in a statement to the newspaper that Dong is not on its list of authorized distributors and that it is unknown whether Dong had authorized lower-level distributors for the resale of Apple products.

The incident has something to do with Apple's business model, an industry expert said. With its technology and branding advantage, a pyramid styled distribution structure has been formed by the company. Upper-level distributors have an absolute advantage in price bargaining and taking delivery for products over lower-level distributors, allowing them to get pre-paid fees instead of following the "cash on delivery" system, the industry expert added.

State-owned banks are also happy to lend lots of money to the large distributor, even though they do not receive any tangible form of guarantee, the report said, citing the expert.

Banks also believe they are sure to get their money back, along with a good profit, because Apple products sell well, the report said.

The case was reported to the police in Beijing's Haidian district, a distributor stated.

The police confirmed they are investigating the case and trying to locate Dong, according to the report.