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Death sentence for China bank fraud

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Some Chinese investors shun established banks in the hope of making bigger returns

Some Chinese investors shun established banks in the hope of making bigger returns

PA Archive/Press Association Images

Some Chinese investors shun established banks in the hope of making bigger returns

A woman running a private banking operation in China has been sentenced to death after being found guilty of defrauding investors.

Lin Haiyan was convicted of "illegal fundraising" for collecting 640 million yuan (£66 million) from investors by promising high returns and low risk, according to the Intermediate People's Court in Wenzhou, a centre for private sector business. It said the scheme collapsed in October 2011.

The case highlighted potential abuses in largely unregulated informal lending that supports entrepreneurs who generate China's new jobs and wealth but often cannot get loans from the state-owned banking industry. The government is tightening controls after the global economic downturn sparked a wave of defaults and protests by lenders.

Another businesswoman from Wenzhou also was sentenced to death last year on illegal fundraising charges. That penalty was overturned following an outcry on the Internet and she was sentenced to prison.

Communist leaders have promised more bank lending for entrepreneurs and announced a pilot project in 2012 in Wenzhou to allow closely supervised private sector lending. But business leaders in Wenzhou say it is harder for entrepreneurs to get loans because worsening economic conditions have made banks and private sources reluctant to lend.

Many households provide money for private lending in an effort to get a better return than the low deposit rates paid by Chinese banks, which effectively force depositors to subsidise low-interest loans to state industry.

Around 1,500 people have been jailed for at least five years for involvement in underground lending since 2011.

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Legal experts say loans between individuals are legal and the government has failed to make clear what lenders and borrowers are allowed to do.

Lin started raising money from friends, relatives and co-workers in 2007, telling them the money was going into stock offerings and bank deposits. But she used it to speculate in stocks. Even as losses mounted, Lin continued to raise money until the scheme collapsed.

The statement said the penalty still must be confirmed. All death sentences in China are automatically appealed to the country's highest court for review.


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