A court in the eastern Chinese province of Zhejiang has sentenced to death a woman convicted of "illegal fundraising" on the city's unofficial money markets, official media reported on Thursday.



Lin Haiyan, 39, was handed the death penalty by the Intermediate People's Court in Wenzhou city on Wednesday, after being found guilty of illegally raising 640 million yuan (U.S.$104.1 million) and misappropriating 428 million yuan (U.S.$69.6 million) of that amount.



China's leaders have vowed to crack down on unauthorized lending networks, which economists say are a direct result of a state monopoly on formal lending.



"In China, this sort of thing is pretty common, because there is a very tightly controlled state monopoly on the financial sector," independent economist Chen Yuebo said in an interview on Thursday.



"There is also a huge spread between interest rates earned on savings and those charged on loans, so there's plenty of room to make a profit."



He said China's state-run banks tend not to excel at the marketing side of their business, leaving a gap which has been readily filled by informal lending networks of largely individual savers looking for better returns.



He said entrepreneurs can often find plenty of funds available via their existing social networks, and have no need to try to satisfy tough conditions attached to loans from state-run banks.



"Whenever this free-floating cash sees an opportunity for profit, it will flow in huge amounts in that direction," Chen said.



Death penalty questioned



Shanghai-based lawyer Li Honghua said there is some uncertainty over whether Lin had indeed satisfied the definition of "illegal fundraising," however.



He called for a review of the use of the death penalty for economic crimes in China.



"In the West, they don't use the death penalty for economic crimes, and I think we in China need to change this," Li said.



He said "more serious" crimes like large-scale bribe-taking and embezzlement by high-ranking officials are likely to attract a suspended death sentence, commutable to a jail term after two years of good behavior.



"The proportion of corrupt officials and state-owned enterprise executives who get the death penalty is extremely low, while the rate among private entrepreneurs is extremely high," Li said.



"This is a sort of attack on private enterprise in China," he said.



Calls to legalize private markets



Last year, an appeals court in the eastern Chinese province of Zhejiang suspended a death sentence handed down to former billionaire businesswoman Wu Ying for fraud, putting the spotlight firmly on unofficial credit networks.



Wu's case sparked widespread calls for the legalization and regulation of the shadowy private money markets, which have sprung up as a way around China's state monopoly on bank loans.



Lin set up Wenzhou Xinfu Investment Consulting Co. in May 2008, raising money from more than 20 investors between 2007 and 2011 by promising to offer high returns, the court said in its judgment.



She then used all the money to buy stocks and futures, which resulted in huge losses, it said.



The court verdict also said Lin had been found guilty of acting as a trading agent for Hong Kong-based online broker Quam Securities without "authorization from the appropriate government departments," the official English-language China Daily reported.



It said Lin had opened stock and future accounts under 20 different names and use the raised funds for futures trading, falsifying her losses and claiming huge profits to secure further investments from colleagues, friends, and relatives.



Lin's case is closely linked to a government crackdown on informal lending that sparked a credit crisis in Wenzhou beginning in September 2011, it said.



As with all death penalty cases, Lin's case will now be submitted to the Supreme People's Court in Beijing for review.



Reported by Yang Fan for RFA's Mandarin Service. Translated and written in English by Luisetta Mudie.