Economy

Should bankers be executed?

Outcry may see private lender avoid death penalty

Looking for a reprieve: Wu Ying

A favourite saying during the Cultural Revolution was that “wrongly killing a hundred people is better than letting a single guilty one escape.” In the case of Wu Ying – a young woman currently on death row for “illegal fundraising” – the public mood seems to be a little more sympathetic.

Wu’s story is well known. From a first job at a hair salon, she built up a beauty parlour empire, becoming the sixth richest woman in China (as ranked by the Hurun Report).

But her fortunes began to unravel when she got involved in a private lending network in Zhejiang, her home province (see WiC104). She was arrested in 2009, convicted for “fraudulent fundraising” and sentenced to death.

Economic and non-violent crimes account for nearly a fifth of capital offences in China, reports the Wall Street Journal, although authorities have been reducing the number of offences on the death penalty list.

Of course, this all comes too late for Wu, who has already appealed unsuccessfully against her sentence.

But there is growing public pressure for the sentence to be looked at again, preferably in a new province. The case now goes to the Supreme People’s Court for final approval, with China’s highest judicial body saying on Tuesday it will treat the case “with caution”, a situation the BBC described as a “rare gesture”.

No doubt Wu will be hoping that it is more than a token effort.

There is plenty of criticism over the way the case has been handled, and especially the severity of the sentence. A major complaint is that Wu seems to have been singled out for punishment. Even some of those who lost money in Wu’s lending scheme think the sentence is too harsh. “There are so many investment companies, and if this is a crime then half the people in this field should be sent to jail,” one creditor told China Entrepreneur magazine.

Wu’s supporters also say that – by treating her as a fraudster – the authorities are ignoring the wider realities of the private lending business, which has grown to substantial proportions as an essential source of finance for many small and medium-sized businesses.

“The Wu Ying case is the product of the private finance market,” acknowledged Wang Wei, a respected financial commentator.

Another criticism is that a government official would not have received a similar sentence. “Capital punishment should be given out with extra care. While the sentencing of corrupt officials has become increasingly lax, why are we so hasty to take away a young life for a crime that does not deserve death?” Han Zhiguo, director of Beijing Institute of State and Fortune wrote on his weibo.

It should be no surprise that Wu comes from Zhejiang, the province that has seen most of the highest profile private lending scandals. Wenzhou, a free-wheeling entreprenurial city in the province, is said to be at the heart of many of the lending networks. As a result Chen Derong, a leading Party official in Wenzhou, has even taken to defending its reputation. Speaking at a forum in northern China, Chen said the city was being “demonised” for its prominence in the informal lending market but that without “private finance” there would have been “no market economy in Wenzhou, nor would have there been Wenzhou entrepreneurs,” reports the Zhejiang Daily.

Neverthless, the risks of an unregulated system of private debt were highlighted again last week, following the collapse of another loan network in Wenzhou. Police have arrested Dong Shunsheng, the chairman of Liren Education Group, for an illegal borrowing scheme that raised at least Rmb2.2 billion ($350 million) over the last nine years, reports Caixin. This is the largest private lending case to come to light so far, Caixin calculates.

Certainly, the loans involved in Dong’s case exceed those that led to Wu Ying’s sentencing to death.

Dong must now be praying that he doesn’t suffer a similar fate.

Keeping track: some major sentencing has been going on in China this week. First off, smuggler Lai Changxing was given a life sentence in jail. This was not a major shock. As we reported in WiC117 he had been extradited from Canada on condition that he would not get the death sentence. More of a surprise was the new sentence handed down to underground lender Wu Ying. As we reported in WiC147, she had been awarded a rare stay of execution by the Supreme Court after huge protests were launched in the media and online about the severity of her death sentence. She was retried in her native Zhejiang this week and given a lighter sentence. The 31 year-old former billionaire was also given a life sentence, but with a two year reprieve from execution. This means that if she does anything in the next two years that constitute bad behaviour she may still face death, but many in China now think this unlikely. (May 25, 2012)


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