By Yu Ran

Zheng Zhuju, one of Zhejiang’s most notorious small business owners who failed to pay back money borrowed from underground banks in Wenzhou, was the first entrepreneur arrested by the local police on Sept 9 for her involvement in gray market deals.

As one of the most legendary businesswomen in Wenzhou, Zheng’s company Wenzhou Baile Electronic Appliances Co, Ltd, used to work closely with famous electronic appliances companies, including Siemens, Sony, Panasonic and LG.

“Any brand of electronic appliances you mention, you could find it at her store. She definitely was the biggest electronic appliance supplier with top sales in Longwan, a region in Wenzhou,” said Zhang Qiang, a local electronic appliance manufacturer.

Zheng’s name garnered media attention last month after a post was forwarded on online forums in Wenzhou on Aug 28 about how Zheng had been in charge of a series of illegal fund-raising activities at an underground bank amounting to almost 300 million yuan ($47 million).

Rumors also circulated that Zheng and her family had gone missing, with all their phones switched off, since Aug 26.

Since then, Zheng has been out of reach by those lenders with her factories and companies shut down.

After the rumor spread among netizens, a list of private money lenders who lent money to Zheng was also posted online on Sept 8 showing that Zheng owed at least 90 million yuan to 85 people including 20 million yuan to two individual money lenders.

Police announced the warrant for Zheng’s arrest for her involvement in illegal business on Sept 9 at an industrial park in the suburbs of Wenzhou and was apprehended later that day.

Police said that the case was still under investigation on the detailed debts that Zheng owes to private lenders and whether Zheng’s current financial situation could afford to pay the money back.

Zheng’s second son explained to local media that Zheng owed about 280 million yuan to private lenders, including 180 million for cash and the rest for bank drafts.

“As I knew that Zheng could earn at least several million yuan annually in the past decade and she started borrowing money in the underground banking about five years ago to expand her business,” said a private lender who asked not to be named.

The source lent about 1 million yuan to Zheng via a friend.

She added that her business tended to be affected by worsening sales of her products and she gradually failed to return the high-interest loans.

Most private lenders worried that Zheng had already decided not to pay back the debts when she transferred her properties to her sons’ and daughter-in-laws’ accounts last year.

“We’ve heard that she’s been preparing to run away with her family since last year when most of her properties were transferred to her sons and daughter-in-laws, including the company ownership,” said the private lender.

She added that none of the private lenders knew how much they could claim back from Zheng at the moment.

“I have stopped lending any more than 200,000 yuan to SME owners,” she said.