In Depth: How a Rural Co-Op Took in $420 Million Posing as a Bank

1. A rural cooperative in China’s Anhui province amassed over 2.9 billion yuan (approximately $420 million) in deposits by operating as a bank, despite not being a licensed financial institution. Over six years, thousands of villagers entrusted their savings to what they believed to be a legitimate bank, illustrating significant ongoing risks within China’s expansive shadow banking system. The cooperative's main controllers, Zang Liting and his wife Zong Ruifang, were eventually convicted of illegally collecting public deposits. On July 21, Dangshan County Court sentenced Zang to 15 years and Zong to 10 years in prison. Their appeal, in which they claimed legitimacy as a rural financial cooperative encouraged by the government, was rejected by the Suzhou Intermediate Court on December 8.[para. 1][para. 2]

2. This case underscores the blurry line that exists in rural China between officially sanctioned financial experimentation and outright criminal activity, especially in regions where access to credit remains limited. Zang claimed he was implementing government policies to promote mutual financial aid, but the courts determined his operation was essentially functioning as an unlicensed commercial bank. The cooperative enticed over 19,000 depositors by promising higher-than-average returns. The legal system found the operation breached cooperative principles by accepting public funds outside a closed village circle, thereby transforming it into something akin to a commercial bank in practice, not just in appearance.[para. 3]

3. Zang, a former PE teacher, established the Xiao County Liting Agricultural and Sideline Products Supply and Marketing Professional Cooperative in October 2016. The cooperative mimicked the look, feel, and operations of authentic banks—it had bank-like interiors, commercial-grade currency counters, computerized transaction tracking, and issued certificates resembling deposit slips and passbooks. Through aggressive marketing and a broad network of 45 branches across 16 townships, the organization promised risk-free returns between 4.25% and 5.06%, significantly higher than those of regular state banks. Staff were incentivized with quotas and bonuses for attracting new deposits, leveraging local trust within the rural community.[para. 4][para. 5][para. 6]

4. Membership in the cooperative was open to anyone with as little as 100 yuan, blurring the intended cooperative framework. By April 2023, more than 19,000 people had deposited funds, with an outstanding balance of 620 million yuan owed to roughly 12,000 depositors at the time of collapse. The cooperative worked by paying out enough principal and interest to sustain the operation, effectively creating a classic Ponzi-like churn.[para. 7][para. 8]

5. State involvement lent credibility to the cooperative, further misleading depositors. Local government in Xiao County was aware of the operation, and in early 2017, a government-linked entity bought a 48% stake, making it the cooperative’s largest shareholder. Authorities even monitored the cooperative’s finances and required monthly reports, blurring the lines between state oversight and sanction. Defenders argued this was evidence that the cooperative was a genuine pilot for rural financial reform, in line with repeated central government calls to improve rural access to credit through mutual aid and cooperatives.[para. 9][para. 10][para. 11][para. 12]

6. The central government’s broader crackdown on financial risk exposure tipped the balance. In 2019, national authorities ordered a purge of illegal financial services, targeting entities like Liting Cooperative that masqueraded as banks. Regulatory actions followed, leading to the withdrawal of government investment and eventual prosecution. Courts found that Liting Cooperative was accepting widespread deposits and using the funds for non-agricultural and personal ventures, violating the core cooperative model. Legal experts emphasized that Chinese law does not authorize farmer cooperatives to conduct banking-like financial activities such as collecting public deposits for mutual aid.[para. 13][para. 14][para. 15][para. 16]