As Ponzi Schemes Collapse the Chinese Government Fears Civil Unrest

Tuesday, August 3, 2010
By Paul Martin

by Tyler Durden
ZeroHedge.com
08/02/2010

Submitted by Israel’s Financial Expert

China’s Shark Loan Ponzi Finance- As Ponzi Schemes Collapse the Chinese Government Fears Civil Unrest

Local governmental officials that are demanded from the government to produce double digit GDP growth numbers give real estate developers permits to build housing projects in return for bribes. They also get bribes in return for allowing the shark loan companies to operate under their jurisdiction. Some of them are active partners in shark loan businesses. For example, a party secretary of legal affairs, that controls the public security bureau, which is a court and prosecutor division of government in Yanking city, in She Kiang province tired to run abroad using a passport in 2009 after he found out he can’t repay 60million Yuan. Every scheme has a ring leader whose job is to collect money from all the participants in the ponzi scheme. When some of these ponzi schemes blow up, the party leaders always get bailed out first, and some even ask local business owners to lend them money, and then bail out their own personal fund. After that the ring leader turns himself in and gets protection from the local government.

Most of the funds that are collected in this classic ponzi finance go to local land purchases and real estate development. Part of the funds are used in order to pay back the rolling loan. The short term interest rate in this black market is very high and ranges between 20%-150% annual rate. The sources of the ponzi funds are diverse, as ordinary citizens, banks with corrupted bank officials, and state enterprises play the game.

This month, another Shark Loan Ponzi Scheme Collapsed in Huang Qiao Town In Jiangshu Province

China daily economic news reported:

Huang Qiao Town which is located in Taixing County, Jiang Shu Province is known as “No 1 town in North Jiangshu” According to the article, a few months back, expensive cars were roaming over the streets. But now after the collapse of a giant ponzi scheme supported by 9 so called “Mark Organizations” (local name for shark loan ponzi schemes), many cloth shops, and barber shops (in China, many so called barber shops are in fact brothels) are closed, and the expensive cars are gone. Town residents are posting their shops and cars for sale to pay back shark loans.

The Rest…HERE

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