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Remote Ningxia county the base for sinister pyramid scheme

  • Staff Reporter
  • 2012-12-12
  • 08:49 (GMT+8)
A family in Helan county, Ningxia. (Photo/Xinhua)

A family in Helan county, Ningxia. (Photo/Xinhua)

The county of Helan in northwest China's Ningxia Hui autonomous region operates on two levels — one familiar to anyone and a hidden world which revolves around an enormous, illegal multilevel marketing business, Guangzhou's Southern Weekly reports.

One in every four residents in Helan is likely to be involved in this illicit business, said Wang Feilei, head of the county's task force charged with fighting "economic crime."

Li Xu, head of the Beijing-based China Anti-Pyramid Promotion Association, which helps rescue people sometimes held against their will, from cult-like organizations that profit from such marketing schemes. Li said that he had never before seen such a high concentration of people involved in the business in one place as he had in Helan.

During a massive crackdown on illegal businesses between June 16 and Aug. 1 last year, the task force raided 6,653 houses rounding up 1,927 suspects, said Guo Yu, a member of Wang's team.

Guo said the availability of cheap housing in Helan has attracted individuals running these criminal schemes to rent houses locally and train new members for their organizations.

In recent years the construction of over 70 residential property projects has begun in Helan, with one claiming to house 50,000 people — which also happens to be the county's total population, the paper said.

These kinds of illegal schemes, branded in China as "southern-style multilevel marketing," amassed money from rental fees paid by new members and their subsequent new recruits.

Unlike many pyramid schemes elsewhere, the southern style does not involve the sale of products, only rents, which make it more difficult to trace such activities, Li said.

New members are usually restricted to a house for "training" — essentially a brainwashing exercise where in recruits listen to endless stories of people becoming wealthy through the scheme. They are also forbidden contact with outsiders, the paper said.

The prevalence of these illegal businesses, the newspaper said, is reflected in local rent levels and property prices.

According to Song Meiyun, who rented two properties she owns, says she was able to charge more than 10,000 yuan (US$1,600) in monthly rent until just a few weeks before the last year's crackdown. Today she can only charge a more modest 3,000-4,000 yuan (US$480-$640). Similar fluctuations were also witnessed in prices of vegetables sold at local markets, she added.

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