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Ex-tycoon sidesteps sentence of death (2)

(China Daily)

10:20, April 21, 2012

In 2007 she was arrested in a Beijing airport during a business trip and later charged with illegal fundraising.

According to the court, Wu could not return 380 million yuan, and large amounts of other debts were unpaid.

The flourishing of shadow banking is partly a result of a two-year credit squeeze to rein in rising inflation and cool down a bullish property market.

It is especially rampant in Wenzhou, and many entrepreneurs have fled the city after being unable or unwilling to pay back money borrowed from underground banks, threatening the country's financial stability.

Accounting and consulting firm Deloitte Touche Tohmatsu estimated China's shadow banking system was worth 11.5 trillion yuan, one-fifth the size of the country's official loan market.

But experts believe things are about to change after the developments in Wu's case and after a pilot project was approved by the central government in Wenzhou allowing private lenders to register as private institutions that can operate with the blessing of the State.

Liu Renwen, a scholar on criminal law from the Chinese Academy of Social Sciences, said the top court's review of Wu's case could serve as a legal precedent for other cases of illegal fundraising, at least in reducing the use of death sentences in such cases.

"The court's decision marks a turnaround for the nation's underground lending," said Yao Minglong, a professor with Zhejiang University school of management.

He believes the country will start making new financial rules to help shadow banking come out of the shadows.

Earlier this month, Premier Wen Jiabao declared that the State-owned banks' monopoly must be broken, and hinted that the reforms in Wenzhou would be expanded nationally if successful.

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