"We should impose severer punishment on illegal fund-raising to maintain good economic and financial order," said Xiao Yuhuai, head of the Jiangxi bureau of the China Banking Regulatory Commission and a deputy to the National People's Congress (NPC), China's legislature.

    From January to November 2006, the Ministry of Public Security filed nearly 1,500 cases on collecting public money through illegal means, which involved 28.1 billion yuan (3.63 billion U.S. dollars).

    Illegal fund-raising was made in the forms of joint breeding or planting, underground banking, and illegal financing and bond-issuing, said Xiao.

    The latest case was discovered in east China's booming Zhejiang Province, where a 26-year-old billionairess pooled funds illegally by promising investors lucrative returns ranging from 3 to 10 percent per month. But several of her creditors failed to reclaim their investment.

    In an earlier report, a company in northeast China raised a huge amount equaling some 379 million dollars from gullible members of the public by absorbing them in a fraudulent ant-breeding project.

    Xiao noted that illegal fund-raising cases are hard to define due to absence of relevant clauses in current laws and regulations. The lack of effective information exchange channels between governmental departments further increases the difficulty in handling such cases.

    Meanwhile, people with extra money but inadequate financial and legal knowledge and low risk awareness would give frauds chances, Xiao added.

    The State Council has approved a proposal to set up a ministerial joint meeting mechanism to jointly fight illegal fund-raising.