Related News
Loan sharks exposed by Wenzhou subprime crunch
By Lydia Chen |
September 28, 2011, Wednesday
|
Online Edition
Online Edition
THE spreading subprime lending crisis in eastern China's Wenzhou City has exposed an illegal loan shark business funded by government officials who may have lent hundreds of millions to others in search of juicy returns.
Xinhua news agency said today that government officials' fortunes have been linked to numerous cases of illegal lending to local small business owners, who are now fleeing as they are unable to pay back the money.
Private lending in Wenzhou, the cradle of China's private sector, has been booming since the country introduced its monetary tightening policies late last year to fight inflation. State-owned banks, under orders to maintain a stable loan-to-deposit ratio, are reluctant to offer loans to small firms like those in Wenzhou over default concerns.
The difficulty of borrowing money from banks has forced some small business owners to turn to private lending, mostly illegal, for help despite high interest rates. However, when their turnover slows down, small business owners soon find themselves unable to repay the loans.
In the case of alleged loan shark Shi Xiaojie alone, 80 percent of her funding sources are estimated to be government officials who may have lent a combined sum of 800 million yuan (US$125 million) to her.
Shi runs several credit guarantee firms in Wenzhou and has borrowed nearly 1.3 billion yuan from individual lenders. She in turn offered the funds to borrowers at an annual interest rate ranging from 24 percent to 140 percent, according to the report.
Police have detained Shi and her husband on suspicion of illegal financing after the couple, who fled from Wenzhou last week, was caught days later.
But the whereabouts of the 1.3 billion yuan remains unclear and bank records showed in August alone that Shi transferred 800 million yuan to an unidentified person, according to the report.
"Those officials are now trying to get their money back while keeping a low profile to avoid too much attention," an unidentified lender told Xinhua.
A woman, who claims to be one of Shi's victims, told Xinhua that her husband, a government servant, had lent "some money" to Shi.
"It is driving me crazy that I have no idea where my money is and I have no place to register my complaint," the woman, who declined to be identified, said.
"I can't tell people how much money I lent to them and have to keep a low profile when seeking my money back," she added.
She said many of the lenders didn't go to police for help as they hoped to get their money back on their own without drawing attention to themselves.
The report cited a legal expert in Wenzhou as saying that officials and government servants usually have close relationships to the small business owners and bosses of credit guarantee firms.
Meanwhile, the boss of a Wenzhou shoe making firm, yesterday committed suicide by jumping from the 22-storey residential building where he lived.
He was believed to be in financial trouble after banks turned down his application for more loans. His firm already owes 100 million yuan to banks, according to an Oriental Morning Post report today.
Xinhua news agency said today that government officials' fortunes have been linked to numerous cases of illegal lending to local small business owners, who are now fleeing as they are unable to pay back the money.
Private lending in Wenzhou, the cradle of China's private sector, has been booming since the country introduced its monetary tightening policies late last year to fight inflation. State-owned banks, under orders to maintain a stable loan-to-deposit ratio, are reluctant to offer loans to small firms like those in Wenzhou over default concerns.
The difficulty of borrowing money from banks has forced some small business owners to turn to private lending, mostly illegal, for help despite high interest rates. However, when their turnover slows down, small business owners soon find themselves unable to repay the loans.
In the case of alleged loan shark Shi Xiaojie alone, 80 percent of her funding sources are estimated to be government officials who may have lent a combined sum of 800 million yuan (US$125 million) to her.
Shi runs several credit guarantee firms in Wenzhou and has borrowed nearly 1.3 billion yuan from individual lenders. She in turn offered the funds to borrowers at an annual interest rate ranging from 24 percent to 140 percent, according to the report.
Police have detained Shi and her husband on suspicion of illegal financing after the couple, who fled from Wenzhou last week, was caught days later.
But the whereabouts of the 1.3 billion yuan remains unclear and bank records showed in August alone that Shi transferred 800 million yuan to an unidentified person, according to the report.
"Those officials are now trying to get their money back while keeping a low profile to avoid too much attention," an unidentified lender told Xinhua.
A woman, who claims to be one of Shi's victims, told Xinhua that her husband, a government servant, had lent "some money" to Shi.
"It is driving me crazy that I have no idea where my money is and I have no place to register my complaint," the woman, who declined to be identified, said.
"I can't tell people how much money I lent to them and have to keep a low profile when seeking my money back," she added.
She said many of the lenders didn't go to police for help as they hoped to get their money back on their own without drawing attention to themselves.
The report cited a legal expert in Wenzhou as saying that officials and government servants usually have close relationships to the small business owners and bosses of credit guarantee firms.
Meanwhile, the boss of a Wenzhou shoe making firm, yesterday committed suicide by jumping from the 22-storey residential building where he lived.
He was believed to be in financial trouble after banks turned down his application for more loans. His firm already owes 100 million yuan to banks, according to an Oriental Morning Post report today.
- About Us
- |
- Terms of Use
- |
-
RSS - |
- Privacy Policy
- |
- Contact Us
- |
- Shanghai Call Center: 962288
- |
- Tip-off hotline: 52920043
- 沪ICP证：沪ICP备05050403号-1
- |
- 互联网新闻信息服务许可证：31120180004
- |
- 网络视听许可证：0909346
- |
- 广播电视节目制作许可证：沪字第354号
- |
- 增值电信业务经营许可证：沪B2-20120012
Copyright © 1999- Shanghai Daily. All rights reserved.Preferably viewed with Internet Explorer 8 or newer browsers.
