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China hands down death sentences in finance crackdown

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(Globalpost/GlobalPost)

China said on Friday it has jailed or sentenced to death more than 1,400 people for involvement in underground finance during a crackdown on informal lending to private enterprises.

China has convicted 4,170 people on charges of "illegal fund-raising" since 2011, with 1,449 given sentences ranging from five years in prison to the death penalty, China's State Council Information Office said on its website.

It did not say how many of those were sentenced to death.

The rate of "heavy" punishments reflects official "determination to crack down on illegal fund-raising", the website quoted Du Jinfu, a Public Security Ministry official who leads a task force on underground lending, as saying.

The others convicted received lesser penalties, he said.

China's state-controlled banks are not allowed to charge higher interest on riskier loans, making them reluctant to lend to small and medium sized enterprises, leaving business owners dependent on illegal loans.

Economists including those from the World Bank have urged China to relax restrictions on lending to increase financing to China's entrepreneurs, who have consistently generated faster growth than state-owned companies.

China's "shadow banking" industry, which includes private lending as well as off-balance-sheet vehicles and trusts, amounts to at least $3.35 trillion, or 45 percent of gross domestic product, according to Swiss financial firm UBS AG.

In China, "illegal fundraising" outlaws various kinds of investment schemes, and the charge has been used to sentence private lenders.

"The distinction between illegal fundraising and private lending still remains unclear," the Beijing Times newspaper said in a February editorial.

China sentenced businesswoman Wu Ying to death for "illegal fundraising" in 2009, provoking a public outcry. China's Supreme Court overturned the sentence last year, China's official Xinhua news agency said.

Top Chinese officials in 2012 launched a pilot scheme to funnel more money to enterprises in Wenzhou, a business hub in east China rife with under-the-counter lenders who charge annual interest rates of 40 percent or even more.

The city was hit by a debt crisis in 2011 when a number of private loans went bad, leading entrepreneurs to commit suicide or go into hiding, and sparking fears of a nationwide financial crisis.

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http://www.globalpost.com/dispatch/news/afp/130426/china-hands-down-death-sentences-finance-crackdown