The perils of pyramid schemes: a dark corner of China’s economic miracle
Underground get-rich-quick scams that prey on wide swathe of population pose a risk too big for Beijing to ignore
The swollen body of 23-year-old Li Wenxing, a casualty of China’s widespread, illegal pyramid sales schemes, was found in a pond on the outskirts of Tianjin on July 14, two months after he arrived in the city.
He’d been desperate for a decent job after graduating from a university in northeastern China last summer, and had left Beijing, where he’d been living in a rented room, by high-speed train on May 20 to start work as a software engineer.
But the job offer turned out to be just bait and police said Li, the son of a peasant family from Shandong province, was instead lured into a pyramid sales scheme after being threatened and brainwashed.
Police have yet to classify his death, which made headlines around the country, as an accident, suicide or murder, but the case shed light on a dark corner of the Chinese economy – the pyramid sales schemes known as chuan xiao (multi-level marketing) that pose huge risks to social stability.
The underground schemes, some involving millions of members, form what has become known as a “grey rhino” risk for Beijing – a danger to the financial system that is too big for the world’s second-biggest economy to ignore.
