[I]t was reported that several business executives in Xiamen in neighboring Fujian province have also gone on the run because they could not pay back money borrowed from loan sharks.
Local police reported that about 12 billion yuan (US$1.88 billion) is involved in cases of fugitive bosses, according to Strait Herald in Xiamen.
According to an insider of the private lending market in Xiamen, although government authorities have not published information, reliable resources say local police have received reports of loan shark cases involving amounts of up to 12 billion yuan (US$1.88 billion).
The report indicated that 60-70 creditors were directly involved in these cases and represented about 600-700 smaller creditors in turn.
The real risk here, even beyond the closing shops and economic chaos, is the involvement of average households. Americans, with our depression created FDIC, must cast our collective experience back to 1929 and the un-guaranteed bank runs, to get some sense of the devastation that will be wrought when the house of cards comes down. While they might be able to bail out a handful of banks, yet again, the Chinese government cannot bail out 50-70% of all households.
Private Lending Frenzy Triggers Financial Crisis in China's Entrepreneurial Hub
Total deposit outflow from regular banks to the private lending market has been around 3 trillion yuan (US$470.37 billion) during the first three quarters of this year, according to Liu Mingkang from China’s Banking Regulatory Commission.
Sixty-four listed, non-financial companies, 90 percent of which are state-owned enterprises, have invested 16.9 billion yuan (US$2.65 billion) in private loan lending.
In Ordos, Inner Mongolia, 50 percent of residents are involved in underground lending, whereas in Wenzhou, 89 percent of families and 60 percent of businesses are engaged in similar activities.
Ms. Li, who works for a foreign company in Shanghai, told The Epoch Times that her parents have deposited about one million yuan (US$156,800)--their entire life savings and money they made from selling a house--into a small private lending company in Wenzhou, at a 2 percent monthly interest rate. This investment brings them an additional monthly income of 20,000 yuan (US$3,000).
The deal was so sweet that her parents then applied for a secured loan of 800,000 yuan (US$125,000) from a regular bank on another house they owned, and invested the money with the same private lender to earn extra cash, Li said.
Like Li's parents, many ordinary Chinese have been pouring money, including their life savings, into the underground lending market.