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Chinese businessman detained after failing to repay billions of yuan of private lending

(Xinhua)

09:56, February 06, 2012

HANGZHOU, Feb. 6 (Xinhua) -- Police in east China's Zhejiang province have detained the boss of an education group as his firm was in debt to about 1,000 private lenders, said the local government on Sunday.

Dong Shunsheng, president of the Liren Education Group in Wenzhou, was detained Friday, said a statement released by the government in Taishun county in Wenzhou.

Liren announced on October 31 that it would stop repaying creditors and start asset restructuring after the company's cash chain ruptured.

According to the announcement, the company was 2.2 billion yuan in debt to about 1,000 creditors.

The county government's statement said the government is still assessing the amount of Liren's loans and the number of creditors.

The group, set up in 2003, owns 36 schools and companies across the country. Its subsidiaries are operating in several sectors including education, real estate and mining.

China has been cracking down on private lending -- which is booming in Zhejiang, the cradle of private enterprises as most small businesses have problem getting bank loans since last year after defaults raised worries of a debt crisis.

A court in the province's Jinhua city in January upheld the death sentence for Wu Ying, a businesswoman who was once listed among the country's richest women, after cheating investors out of 380 million yuan.

Wu, the 31-year-old former owner of the Zhejiang-based Bense Holding Group, raised money by promising high returns to investors, but then used the funds to repay other debts.

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