August 06,2009

China's "Mafia" Economy Spreads Its Web

By CSC staff, Shanghai

China's huge illegal underground economy has become so widespread and powerful that it is threatening not only the development of private companies but also the business of the government and state-owned sectors. Local governments are beginning to crack down.

Chongqing, a municipality in the southwest of China, has been notorious for its "mafia" economy. Li Qing, boss of the Yuqiang Group, which focuses on real estate development and transportation, was detained last month for being involved. Wang Lijun, director of the Public Security Bureau of Chongqing, said recently the government would spare no effort in fighting the local "mafia."

In 2008, loan sharking in Chongqing is estimated to have totaled over 30 billion yuan, equal to 1/3 of the city's total fiscal income. The total assets of one gang reached over 3 billion yuan, a quarter of which came from loan sharking.

Local businesses have long been hassled and blackmailed by local gangs. One blackmail case earned a reported 100 million yuan.

Wang Lijun was once the Public Security Bureau director of Tieling, Liaoning Province, and was praised as an "anti-mafia hero." He was appointed to the Public Security Bureau of Chongqing as vice director in June 2008, and was then promoted to director.

Wang Lijun also said "mafia" groups are also involved in extorting money from famous enterprises in Chongqing. One businessman who has investments in Chongqing said he had been extorted out of 50 million yuan, and he dared not speak out until now. "I've been separated from my family, and haven't known where they were living for several years, for if I knew that, they would be in danger."

"The overseas accounts of the criminal gangs have been frozen. The money they extorted from you will be returned and the over 100 million yuan in usury will be written off," Wang Lijun promised entrepreneurs. "This amount of money is just as investment in small and medium enterprises."

But a lot of people in Chongqing are involved in these groups, and they have tremendous influence on the local economy. Some gangs hide behind a legal business and fund their illegal activities with its earnings. They have also themselves entered into many industries through blackmail, extortion, and usury.


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