Investigation into pyramid business scheme has investors protesting near heart of Beijing

Protesters demonstrating in Dahongmen, Beijing.
Protesters demonstrating in Dahongmen, Beijing.PHOTO: SCREENGRAB FROM VIDEO

BEIJING (NYTIMES) - Many hundreds of Chinese investors who paid into what police have called a pyramid investment scheme took to the streets of Beijing on Monday (July 24), not to denounce the business in which some had placed their life savings, but to oppose the government investigation that threatened their earnings.

While demonstrations over losses in investment schemes are not uncommon in China, the size and timing of Monday's protest was.

Just kilometres from Tiananmen Square and months before an important Communist Party congress, the protest seemed aimed at embarrassing the government.

Many protesters waved Chinese flags and some held banners appealing to President Xi Jinping to overturn the crackdown on their investment scheme, called Shanxinhui, and the recent arrest of its founder, Mr Zhang Tianming.

"Today's protest was self-organised," said Ms Li Yinuo, a 31-year-old investor who joined the demonstration. She had travelled to Beijing from her home in nearby Hebei province and had heard that investors were gathering.

"They call us a pyramid scheme, which is absolutely not true. We came here today first to save ourselves and the platform. Second, we want Mr Zhang to be released. Mr Zhang is such a fine man."

But the government and state news media have described the investment scheme as a dangerous swindle that preys on the gullibility and generosity of people who like the idea of making money while helping others.

Hours after the demonstration erupted in the morning in Dahongmen, a neighbourhood about 6.5km south of Tiananmen Square, police arrived with buses to remove protesters from the site near the heart of the capital.

Last Friday (July 21), police arrested several people working for units of Shanxinhui, according to Xinhua, the state-run news agency.

Mr Zhang, the company's founder and legal representative, and several employees were arrested on charges of defrauding "a huge amount of property" from victims "under the guise of helping the poor and achieving common wealth", Xinhua reported.

Shanxinhui means "kindhearted exchange" and the group has promoted itself more as a charity that happens to make money than an investment plan.

Ms Li, the investor, was defensive about the intentions of Shanxinhui. But she also gave a fervent description of how it worked by drawing in more investors attracted to profiting through good works.

"Many people don't understand us and call us a pyramid scheme," Ms Li said. "What we sell to people is benevolence. When they first join the group, their purpose might be to make money. But as you get to know more about the programme, your main focus will shift to help other people." 

"I've helped 17 members of the group with the money I earned from this programme."

The protesters in Beijing carried banners that said Shanxinhui had been "persecuted" and they called on President Xi and his government to investigate their complaints.

Chinese social media users have posted about protests in other Chinese cities in recent weeks related to the company.

"Xi Jinping, solve the reasonable demands of the public swiftly and lawfully," said one banner shown on social media.

But this noisy and sizable demonstration is likely to be especially galling for the government, which prizes stability in the capital.

Beijing will host a Communist Party Congress this autumn that will inaugurate a second five-year term for Mr Xi, who is party general secretary as well as president. The build-up to that meeting has intensified official worries about unrest in the capital.

Beijing police have warned against illegal gatherings after the protest, saying in a statement late on Monday that “certain members of Shanxinhui were incited by those with ulterior motives to come to Beijing and illegally gather, seriously disturbing social order in the capital”.

Their behaviour was “suspected of offending against laws and rules” and police were able to convince the demonstrators to leave in an orderly manner, it said.

Some people had been detained for “taking the lead” in creating trouble and refusing to listen to instructions, the police said, without elaborating.

There was no sign of any protesters on Tuesday morning, with a light but noticeable presence of police officers and vehicles in and around the small convention centre in the working class neighbourhood of southern Beijing where the demonstrators had gathered.

Beijing police said in their statement it was against the law to organise “illegal gatherings” and those who do so would be punished.
The statement did not provide an estimate of the numbers of protesters. 

The Chinese police and the news media have in recent months issued warnings and reports accusing Shanxinhui of swindling small-time investors through extravagant promises paid for by luring in yet more gullible investors.

Previously, though, the scheme energetically courted official favour by promising money to charitable causes and government-endorsed efforts to help the poor.

Some investors appeared unwilling to accept that they may have been duped.

One investor, Mr Zhao Guosheng, 40, said he had invested 3,000 yuan (S$606) with Shanxinhui this year. He accused officials in the city of Yongzhou, in Hunan province, of threatening to label Shanxinhui a pyramid scheme if the company did not pay off the politicians.

Communist Party officials in Yongzhou denied the blackmail accusation in a social media post, writing that the accusations "damaged civil servants' images and infringed their legal rights".

Mr Zhao complained that the arrests of Shanxinhui managers meant the company could no longer raise money.

"The people who gathered at Dahongmen today wanted to pressure the government to release the company leaders and let the company run as normal," said Mr Zhao, who did not attend the Beijing protest.

Dahongmen, the area of Beijing where the protesters gathered, is a scrappy area of the capital filled with markets and wholesalers. For many years, it was also heavily populated with migrant workers and traders from other parts of China.

On Monday, locals gathered outside the police cordon, but few knew what had ignited the protests.

In April, the China Women's Development Foundation, a state-backed non-profit social welfare organisation, said it was ending a four-month agreement with Shanxinhui because of "suspicions about the company's business model".

Yet, even after the protest in Beijing was stifled by police, some investors insisted that they were right to put their faith in Mr Zhang.

"Mr Zhang Tianming was wrongly treated. He is a nice guy with no political background," said Mr Zhang Honggang, a 29-year-old steelworker in the north-west province of Shaanxi, who said by telephone that he had invested in Shanxinhui.

"The salary I earn at the steel factory is not much. Next year, I want to buy a car," said Mr Zhang, the steelworker. "If Shanxinhui doesn't go bust, I want to rely on it since it can always make money."