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China criminalizes lending at annualized effective interest rates over 36%

The Chinese government is criminalizing lending at annualized effective interest rates over 36% and other predatory practices.

A person or an entity will face a jail term of up to five years for lending money to more than 10 borrowers within two years at an annualized effective interest rate of more than 36%, according to an Oct. 21 joint release by China's Supreme Court, Supreme People's Procuratorate, the Ministry of Public Security and the Ministry of Justice.

The release said, for loans that are priced below annualized effective interest rates of 36%, lenders will still be criminally liable if they lend 2 million yuan or more to a single individual and extract a profit of more than 800,000 yuan from that individual. Lenders that extend credit of more than 10 million yuan and generate a profit of at least 4 million yuan will also face a jail term of up to five years.

Lenders could also be penalized for lending money to more than 50 borrowers or providing loans that led to the suicide, death or madness of a borrower or the borrower's family members.

As of Oct. 22, US$1 was equivalent to 7.08 Chinese yuan.