Vicious circle of lending left many victims

China: In remote Luxi County, families gambled their future on an illegal economy and created a culture of debt and bitterness.

December 07, 2003|By Gady A. Epstein | Gady A. Epstein,SUN FOREIGN STAFF

LUXI COUNTY, China - They were the best of friends, a restaurant owner and a clothes seller, two women who were models of an enterprising capitalist ethic that has taken root throughout China, even in this remote community in the rural southwest.

But beneath this bright veneer, Wang Mengling and Tang Yunzhi were sinking into a financial underworld of lending societies, high-interest loans, hired thugs and illegal casinos. As in much of rural China, where banks are rarely willing to make substantial loans to workers, it was an informal economy built on friendships and blood ties that gave Wang and Tang a first taste of prosperity, but in the end it would poison their friendship, wreck their families and end their lives.

Wang fell more than $45,000 in debt to Tang, who became so intent on collecting from her former best friend that she had Wang tied to a tree and tortured while she watched, Wang's parents allege. Soon after, Tang and her husband were killed, and Wang and her husband were arrested, convicted of ordering the killings and executed. The illegal economy of Luxi County had claimed four more victims.

"It broke our family," said Wang Tianfu, Wang's father, sitting in the cramped walk-up apartment where he and his wife raise their orphaned granddaughter. "And it brought people's deaths."

In the fleeting rise and violent fall of Wang and Tang lies the story of an underground economy that bred aspirations for prosperity and then savagely consumed them. In Luxi County, a traditional lending culture that has long been the invisible spine of rural Chinese life mutated into a ruthless, destructive criminal culture. Wang's and Tang's families, and many others here, blame local officials for abetting this transformation, profiting from it until, in 2001, they finally cracked down. It illustrates the failings of the government and banking system in China's remote countryside, where power, wealth and misery are often creatures more of local fiat than of rules from Beijing.

During the crackdown, a dozen or more loan sharks - the "most serious" cases, one bank official said - were imprisoned with sentences ranging from a few years to life for bilking people out of millions of dollars. Others emerged wealthy, including casino owners and lending society bosses who left town or escaped serious punishment, and local party officials who allowed or participated in the illegal activity for years.

But thousands of people at nearly every level of society in the Luxi County seat of 80,000 people - farmers, factory workers, teachers, business owners - were left destitute as the illegal economy collapsed like a house of cards. They are working to pay off bank loans and other debts, waiting in vain for money they lent to be repaid.

Their losses range from a few hundred dollars to hundreds of thousands of dollars, and because of the personal nature of the lending culture, such as the loan societies that pooled people's contributions, most know well who took their money - next-door neighbors, old friends, even family members. At the same time, because their cash disappeared into a black market system, they have virtually no chance of recovering it. What is left is a community of debts that will never be paid and bitterness that may never fade.

"Now the close friends and relatives of Luxi County have all become enemies of each other, all because of money," said Li Hongmei, 31. Li and her mother, both former restaurant owners, lost more than $75,000, partly to the head of a lending ring, who was introduced to them by a friend the family now despises. "Everybody was getting involved [in the lending], and crazily so. If you take 100 families in Luxi, at least 99 were involved. People with jobs or without jobs, peasants, workers, officials, even military soldiers. All were involved."

`I fear the mafia'

It is a story few are comfortable telling. Some who have complained were warned by local government officials to stay quiet; in some cases, people were beaten by enforcers working for casino bosses or the heads of lending societies. Most Luxi County residents interviewed for this article insisted that their names not be used, or that only their surnames be used, out of fear of such retribution. "I don't fear the government," said one furniture seller, in an indication of who wields power here, "but I fear the mafia."

Li and others explained this in quiet frustration one recent evening, while Li's 52-year-old mother, He Qiongfen, periodically clenched her teeth and pounded her right shoulder with her left fist, unable to move her right arm. She and her family were attacked in August, after Li complained to the head of a lending ring who had taken $15,000 of their money. The head of the ring and her husband burst into the family home with two or three dozen men brandishing machetes and iron rods, Li said.

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