According to the locals the companies, which included real estate enterprises or private financial institutions, cheated the public of at least 10 billion RMB (US$1.5 billion).
Over 30 companies are believed to have set up dodgy investment schemes in the region. None had full financial backing from established banks, which made repayments virtually impossible.
“These real estate companies cannot get loans from banks, but they need funds in order to operate, so they began to seek funds from the people. The government allowed them to do so at the time,” said one local resident to The Epoch Times.
Over 90 Percent of the City Affected
An elderly woman, who wished to remain anonymous, said the investment scam has entrapped 95 percent of Jishou City—a town with a population of 290,000.
Many are now having difficulty surviving and are frustrated with the authorities, who failed to intervene, she explained
“The real estate company has more than ten offices spread all over the region. It colluded with local authorities. People invested all that they have and lost everything.”
Since 2004 people have been investing thousands, enticed by high interest rates of up to 10 per cent per month. The companies had full support from the local Government and were thus left untouched.
Within a very short time a lot of money was drawn from the community, and in many cases retired workers invested up to 20,000 RMB - equivalent to life-long savings for many people in China.
Investors are saying the companies used much of the money on bribes to persuade local officials to allow the scheme to continue, some did not use the money to operate their business, and some companies did not have more than a few projects operating.
Since the beginning of the year, two of the real estate enterprises, Fuda and Sanguan, stopped interest payments to their investors, and one by one the other companies did the same.
In August some people were still receiving interest payments, but were not able to access their matured principle amount; but after the Olympic Games, even the interest payments stopped.
Massive Military Presence
Last week local residents began distributing leaflets over two days to promote a large-scale protest for Sept. 13. This, they say, prompted authorities to issue what they called “Illegal Fundraising Disciplinary Action” and heighten the military presence in the region.
Website users indicated on Sept. 12 that more than twenty military vehicles arrived in Jishou City in the morning; six or seven were military trucks; four were the latest model anti-explosion trucks with armed police.
“Our sport center and the second high school in Xianxizhou are all occupied by troops. In addition to the anti-riot police patrolling on every street, patrol cars, police cars, anti-riot cars are all patrolling the street,” Mr Li said.
With the heavy military force, people dared not to make any move, he said, and any protest would be seriously suppressed.
“People with bare hands are unable to do anything. After all, people are still very timid or the Chinese Communist Party (CCP) would have been overthrown long ago.”
Corruption Endemic
Corruption has plagued China for decades, despite attempts to clean up rouge Government forces. The Washington Post reports that last year 10 central government departments misused or embezzled $660 million in 117 cases.
Mr. Li said he has had enough of corrupt officials who had promised the problem would be solved in three months.
“Life has been hard on me because I have nothing now.”
Many people affected by the investment scam are similarly reacting to the situation and renouncing their connection to the Communist Party, in what some say is the only option they have left.
“The CCP will collapse sooner or later. It has deceived people all along and should have collapsed long ago,” said one resident.
“The government is capitalist now but claimed to be socialist, so many people have lost their jobs. Corruption is widespread from the national level down to the local level.”
Charlotte Cuthbertson and Sonya Bryskine contributed to this report.
Friends Read Free