Mass lending crackdown in China

A total of 1,449 people were sentenced to imprisonment Friday, said Du Jinfu, a Public Security Ministry official in charge of a task force on underground lending. The prison terms are for at least five years.

Friday's arrests come as part of the 4,170 people who have been convicted since 2011 for violating rules on loans outside the state-run banking system, Du said at a news conference.

People captured in the crackdown were convicted of violations including public advertising to find lenders and promising excessively high rates of returns, Du said. The police official did not say whether those arrested were the borrowers or middlemen who arranged the loans for a fee.

China's state-controlled banks are not allowed to charge higher interest on riskier loans, making them reluctant to give money to private businesses. As a result, entrepreneurs in the private sector rely heavily on informal lending, which is often arranged by middlemen.

Economists from the World Bank and elsewhere have encouraged China to increase financing to private businesses to boost financial growth. Although officials have promised more private sector funding, entrepreneurs say they still have difficulty obtaining loans.

dr/ccp (AP, AFP)