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Villagers lose savings as cooperatives shut down

(Shanghai Daily)

08:12, October 24, 2012

THOUSANDS of villagers in a coastal county in east China's Jiangsu Province were astonished to find that their savings, worth about 110 million yuan (US$17.6 million), in local financial cooperatives had vanished.

Four privately-owned but government-supervised financial cooperatives in Guannan County were shut down a week ago after their managers fled, leaving 2,500 depositors in the lurch.

A local official named Liang Gongzhu said the four cooperatives lent the money illegally to an entrepreneur surnamed Wang to earn high interest on the deposits. But Wang went bankrupt and the lenders could not return the money to their clients, China National Radio reported yesterday.

According to Chinese law, rural financial cooperatives can only lend money to villagers to assist in agricultural activities. Local agricultural and commercial departments are supposed to supervise these private institutions.

But local officials say the law does not specify which government agency is supposed to oversee the operation of rural financial cooperatives. Besides, local governments had little connection with the cooperatives and found it hard to supervise their business.

"They (people who run cooperatives) told me they were approved by agricultural and commercial departments, and I felt reassured," a villager Sun Yuhua said. He had deposited more than 40,000 yuan of savings with one of the cooperatives.

Some suspects have surrendered to police but Wang is still at large, the report said.
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