Economy

China: Dirty Money Lending And The Merchants of Wenzhou

Public officials have been caught repeatedly in usury-related scandals in the wealthy southeastern city of Wenzhou. Not only is it a betrayal of public trust, it exposes an economic system that too often relies on illegal money lending.

Wenzhou in southeastern Zhejiang province, People's Republic of China
Wenzhou in southeastern Zhejiang province, People's Republic of China

Worldcrunch *NEWSBITES

Recently, a couple of moneylenders from Wenzhou China ran off with 1.3 billion RMB ($204 million) worth of deposits, 80% from government coffers. The public reaction fell somewhere short of surprise, as two other similar cases this year had already made headlines: in one, the creditor-victims were all employees of Wenzhou's local judiciary system; in the other case, the usurer, who was a top local Communist Party appointee, was later accused of killing his mistress.

That high-ranking officials are involved in usury has become an open secret over the years in Wenzhou Zhejiang, one of the Chinese regions most active in private lending, where 30% of small and medium-sized enterprises (SME) are believed to rely on illicit moneylenders to maintain their cash flow.

The flight of these usurers not only leaves direct victims, it also breaks the flow of funds and can actually slow the entire regional economy. In September, some 80 Wenzhou entrepreneurs either went bankrupt or fled town. There were two suicides last month because of the despair.

But more than the general downturn for entrepreneurs in Wenzhou, public interest has above all focused on the fact that public officials are involved in private lending.

In general terms, officials are not allowed to run a business and hold shares, let alone act as financial sharks. But in reality, the practice is widespread, benefiting from the fact that both usurer and public officials are aiming for high-interest yields. The rule of the game is an exchange of interests. In guaranteeing their creditors high interest from their deposits, the usurers will also demand "convenience" from the officials or even use the credibility of their official positions so as to attract even more depositors. This is tantamount to a disguised form of bribery.

High returns usually involve high risk. So two other factors explain why these bureaucrats take so much risk in depositing private money. One of them is that a lot of their funds come from corruption and therefore must be laundered anyway. The shady nature of the private funds is perfect for hiding black money, while at the same time yielding much better returns than any proper channel.

A recent survey conducted by the All-China Federation of Industry & Commerce reveals that 90% of Chinese SME cannot obtain loans from banks, which prefer to lend to state enterprises. As the monetary condition tightens further, some say that the SME are finding it even more difficult to cope than they did in 2008, when the financial crisis started.

Read the full story in Chinese

Photo - Malcolm M

*Newsbites are digest items, not direct translations

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Ideas

Saving The Planet Is Really A Question Of Dopamine

Our carelessness toward the environment could be due, in part, to the functioning of a very primitive area of our brain: the striatum.

Ad scuba-diver and brain coral

Stefano Lupieri

PARIS — Almost every week, a new scientific study alerts us to the degradation of the environment. And yet, we continue not to change anything fundamental in our systems of production and habits of consumption. Are we all suffering from blindness, or poisoned by denial?

In his popular books Le Bug humain (The Human Bug) and Où est le sens? (Where is the Sense?), Sébastien Bohler, a journalist in neuroscience and psychology, provides a much more rational explanation: The mechanism responsible for our propensity to destroy our natural environment is in fact a small, very deep and very primitive structure of our brain called the striatum.


This regulator of human motivation seems to have been programmed to favor behaviors that ensure the survival of the species.

Addictions to sex and social media

Since the dawn of humanity, gathering information about our environment, feeding ourselves, ensuring the transmission of our genes through sexual intercourse and asserting our social status have all been rewarded with a shot of dopamine, the 'pleasure hormone.'

Nothing has changed since then; except that, in our society of excess, there is no limit to the satisfaction of these needs. This leads to the overconsumption of food and addictions to everything from sex to social media — which together account for much of the world's destructive agricultural and energy practices.

No matter how much we realize that this is leading to our downfall, we can't help but relapse because we are prisoners of the dopamine pump in the striatum, which cannot be switched off.

Transverse section of striatum from a structural MRI image

Lindsay Hanford and Geoff B Hall via Wikipedia

Tweaking genetics 

According to Bohler, the only way out is to encourage the emergence of new values of sobriety, altruism and slowness. If adopted, these more sustainable notions could be recognized by the striatum as new sources of dopamine reward. But there's the challenge of promoting inspiring stories that infuse them with value.

Take the photo-collage exhibition "J'agis ici... et je m'y colle" ("I'm taking action here... and I'm sticking to it"), a collection of life-size portraits of residents committed to the energy transition, displayed on the walls of the French coastal city of La Rochelle.

Backed by the French National Center for Street Arts, photographer Martin Charpentier may be employing artistic techniques, but he's also tinkering with neuroscience in the process.

Les Echos
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