A metals dealer’s disappearance has left Chinese commodities traders grappling with losses exceeding 1 billion yuan ($144 million), exposing risky practices that regulators have long warned against.
Xu Maohua, known in trading circles as “The Hat,” fled China after orchestrating years of deals involving copper and other metals through a complex network linking private firms, banks, and state-owned enterprises, according to Bloomberg.
State-backed SDIC Commodities Co., a unit of State Development & Investment Corp., is the most prominent participant in the collapsed trading chain. The company faces multiple lawsuits over unpaid bills after Xu’s departure broke a payment system that operated for years.
Guangdong Prolto Supply Chain Management Co. filed a lawsuit seeking 219 million yuan from SDIC Commodities for unpaid shipments of metal concentrate, according to a December exchange filing. A Tianjin court has frozen 3,150 tons of refined copper stored by SDIC’s unit in Wuxi at the request of a policy bank to preserve assets during litigation.
Six former associates told Bloomberg that Xu ran operations from Foshan in Guangdong province, where he controlled multiple companies that bought metals from smelters and resold them to state companies. These transactions often included repurchase agreements that allowed Xu to sell invoices to factoring companies and banks at discounts before delivering actual metal.
The scheme relied on circular trading — a practice where companies repeatedly buy and sell the same goods to inflate revenue figures without generating real economic value. Chinese regulators view this activity as particularly dangerous because it conceals debt and amplifies financial risk.
Sources familiar with Xu’s operations indicated his finances collapsed after betting against silver prices, which have doubled in recent months. Associates said some cargo in the deals either never existed or belonged to other parties.
Born in 1972 in Baiyin, Gansu province, Xu earned a bachelor’s degree from North China University of Technology in Beijing. He started his career trading recycled metals before expanding into refined metals and concentrates, including copper, zinc, and indium.
The State-Owned Assets Supervision and Administration Commission has ordered major commodities trading companies to review their operations and eliminate activities designed primarily to boost sales figures. The watchdog first imposed restrictions in 2023 following a debt crisis at a state timber company.
China’s metals sector has experienced several major scandals, including fictitious aluminum stockpiles that caused losses exceeding $1 billion. A trader in that case received a life sentence in 2025.
SDIC Commodities has not publicly responded to the lawsuits. The company’s parent operates power plants and participates in President Xi Jinping’s Belt and Road initiative. Xu did not respond to requests for comment sent through social media and business contacts.
Estimates from traders directly affected by the collapse suggest total losses could significantly exceed the current 1 billion yuan figure, though no official tally exists.
Information for this story was found via Bloomberg, and the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
