China has announced that since 2011 it has condemned 1,449 people to sentences ranging from five years’ imprisonment to the death penalty for “illegal fundraising”, a frequent practice in a country where small businesses do not have access to bank credit, according to information released.
In all, 4,170 people have already been found guilty of this crime, the official website of the government reveals. There is no information on the number of those sentenced to death.
The “severe” sentence index, including the death penalty, reflects the “determination to crack down on illegal fundraising,” said Du Jinfu, head of the Ministry of Public Security, which is charged with combating such practices.
Illegal diversions of funds include a wide range of fraudulent activities, including the sale of real estate and participation in companies with the purpose of raising funds that are generally used to lend at exorbitant rates.
The state-controlled Chinese banking system is not allowed to charge high rates of risky loans, making them unlikely to offer credit to small and medium-sized enterprises. In this way, entrepreneurs are subject to illegal loans.
Several economists, including representatives of the World Bank, have called on China to liberalize interest rates to encourage banks to lend to small businesses.
In 2009, the death sentence of wealthy businesswoman Wu Ying, for illegally appropriating funds, provoked a stir in public opinion. His sentence ended up being replaced by life imprisonment in 2012 by order of the Supreme Court, thanks to internet.
In 2013, the Chinese government implemented a pilot program to finance small and medium-sized enterprises in the Wenzhou region and Zhejiang city, where clandestine offices set interest rates of up to 40% a year.
In this city, hit by a serious financial crisis in 2011, several insolvent businessmen committed suicide or fled.