After the tragedy of Li Wenxing, the government cracks down on pyramid schemes

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The recent death of a young man named Li Wenxing has pushed the government to announce new action against China’s notorious pyramid schemes gangs. Li, a university graduate aged 23, was found dead on the outskirts of Tianjin on July 14. The young man had fallen victim to a pyramid scheme after answering an advertisement on a job-seekers’ website, Boss Zhaopin. His death has caused widespread sympathy and sparked a national debate.

Just like many fresh graduates from rural families, Li left home and traveled to a bigger city to find work. But the new job he had applied for in Tianjin turned out to be a pyramid scheme. Such schemes usually target the poor or under-educated, promising them well paid jobs and then cajoling or intimidating them into borrowing money from friends and family. On July 8 Li told his family in what would be his final phone call, “No matter who calls for money, don’t give it to them.” After the news of his death was reported by the media, it produced a wave of indignation and calls for action against the gangs. Criticism was also directed at the job seekers’ website for posting such an advert.

Legislation targeting this problem had been released as early as 2005, in the form of the Direct Selling Administration and Prohibition of Pyramid Schemes Ordinance. However it is very difficult to identify and trace pyramid schemes, due to the fact that the gangs are often made up of a group of relatives or close friends. In practice, many such schemes remain undetected and unpunished.

On August 14 the State Administration for Industry and Commerce and the Ministries of Education, Public Affairs and Human Resources and Social Security, jointly issued a notice on the “rectification” of pyramid scheme activities which use job recruitments as a bait, and announced a three-month campaign from August to November, which will include intensive investigations. It has also been assured that the government will investigate popular recruitment platforms, and improve their sense of responsibility. Any enterprises, organizations and individuals that disseminate information related to pyramid schemes are threatened with severe punishment.