Zhao Xijun, deputy dean of the university’s finance school, said: “People are eager to achieve high returns but they do not have adequate knowledge of financial risks or how to screen [products] for them,” reports local newspaper South China Morning Post (SCMP).
He explained that China’s financial markets only opened in the 1990s and have developed very quickly.
“Chinese people have invested heavily in financial products, such as wealth management funds, but only for a very short period of time. They have very little experience,” Zhao said.
He added that investment schemes that use technology as a disguise are particularly hard to control, as they spread very quickly and their associated risks snowball in a very short period of time.
Zhao also pointed out that some frauds are perpetrated by employees of reputable financial institutions, “which are more difficult to spot”.
He said: “A government crackdown is the only effective tool in curbing the spread of such economic crimes.”
Unusual protest
Zhao was speaking after tens of thousands of members of a Ponzi scheme took to the streets in protest after the government declared their scheme illegal and arrested its founder, Zhang Tianming.
The concept behind the scheme was charitable, where people would donate to good causes and then receive larger sums in return.
People were promised returns of between 5% and 50% within 45 days depending on the amount ‘donated’.
Chinese state media, Xinhau News Agency, reported: “A preliminary investigation indicates that Zhang and others are suspected of using ‘alleviating poverty and distributing wealth’ as a front to plan, manipulate and lead members to join pyramid scheme activities, defrauding [them] of a large amount of wealth.”
But according to The New York Times, the protesters were not marching to denounce the Ponzi scheme, into which some of them had poured their life savings.
They were protesting the government’s investigation, as it threatened their potential earnings.
Many of them waved Chinese flags, and some held banners appealing to the president, Xi Jinping, to overturn the crackdown on their investment scheme, called Shanxinhui.
One investor accused officials in Hunan Province of threatening to label Shanxinhui as a pyramid scheme if the company did not pay off some politicians.
Police crackdown
SCMP reported that China’s chief of police, Guo Shengkun, has said his officers will strike hard against fraudulent financial schemes.
“There are huge risks in new types of financial crime in this era of the internet,” he told local police chiefs in Beijing.
“We must resolutely prevent financial crime issues from turning into systemic financial risks, to safeguard social stability,” he said.
