China Is Facing A MLM Pyramid Scheme Epidemic

Multi-level marketing scams, or MLMs are sweeping across China and bilking millions out of their hard-earned money.

Pyramid schemes designed to defraud or swindle people out of money have been against the law in China since the 1990s. They were officially criminalized following the discovery of a string of large-scale operations in 2009. – Source

Four deaths since the beginning of July have been linked to MLMs operating in China. Public outrage has over flowed onto social media.  Beijing has now taken action. A national campaign against pyramid schemes has been launched to try to prevent the public from falling prey to these scams. – Source

In 2005, the Chinese Government enacted a law called “Regulation of Direct Sales and Regulation on Prohibition of Chuanxiao” (where Chuanxiao stand for MLM). With this regulation China makes it clear that while Direct Sales is permitted in the mainland, Multi-Level Marketing is not.

Here is the reason China gives for prohibiting Multi-Level Marketing:

“Because of the multi-level payment structure, the organizers and the members at top level obtain interest illegally and, according to the Chinese Government, disturb normal economic order, and affect social stability.” – Source

Many multi-level marketing companies have been making a fortune in China. How is this possible with China’s strong stand against these types of companies?

MLM is legal in Taiwan and Hong Kong. Sellers from these regions use Taiwanese or Hong Kong addresses and banks to become sales reps in these jurisdictions while at all times living and working in China. Nu Skin was recently under investigation for this type of activity.

Chinese authorities have so far identified two overarching scam strategies. In what Chinese authorities now refer to as the ‘northern’ version, operators often follow a model where people invest in a shell company and then are encouraged with rewards to use their “interpersonal networks” and “direct marketing strategies” to recruit others. Meanwhile, the ‘southern’ model involves forced coercion, threats of violence and what the Chinese press has labeled “brainwashing techniques”. – Source

Four ministries of the Chinese central government will introduce measures to “rectify” the pyramid schemes that “endanger the economic order of the market, as well as social harmony and stability.”

Official Statement:

SAIC Ministry of Education, Ministry of Public Security Ministry of Human Resources and Social Security regarding the development of “recruitment, introduction of work” in the name of pyramid schemes in special work to inform industry and commerce competition [2017] No. 139

Recently, MLM activities are rampant, the use of various channels and means to lure the people involved in the case of misplaced pyramid schemes, serious damage to the people’s lives and property, causing widespread concern in the community. In order to standardize the order of the market economy, maintain social harmony and stability, and further crack down on pyramid selling activities, the four departments decided to carry out a special three months (August 15 – November 15) pyramid schemes special rectification action. The relevant matters are hereby notified as follows:

First, the guiding ideology

Pyramid schemes directly endanger the market economic order and social harmony and stability, to fully understand the importance of combating MLM work in accordance with the law, especially against the “recruitment, introduction work” in the name of pyramid selling illegal acts related to the vital interests of the people, Social harmony and stability of the overall situation, the peaceful construction of China and a comprehensive well-off society, to ensure that people live and work in peace, social stability and orderly, national long-term stability is of great significance.

Second, focus on work

(A) crack down, according to the law to prevent pyramid schemes. We will strengthen the investigation and clean-up of the key areas of the pyramid selling area, and make clear the prevention and control of the aggregation-type pyramid schemes, and ensure the comprehensive prevention and control and containment measures. We will resolutely investigate and deal with a number of MLM organizations and trade leads. On the name of “business, employment,” under the guise of “recruitment” “to introduce the work” in the name of lure job seekers to participate in various types of pyramid schemes, and resolutely eradicated.

(B) to strengthen the focus on the recruitment platform for the investigation, compaction platform enterprises responsibility. Seriously deal with businesses, organizations and individuals that disseminate information.

(C) to strengthen the publicity and education of the people. Focus on doing a good job of college students and job groups to guide the work of education, to enhance the sense of prevention of pyramid schemes.

Third, the schedule

The first stage (August 15 – August 31), the departments should be based on the duties of the recruitment process in the alleged pyramid schemes for Mo Pai, supervise the self-examination and self-examination.

The second stage (September 1 – October 31), to carry out centralized remediation activities. To a comprehensive analysis of the field of personnel in the area gathered in the area of ​​pyramid schemes activities, crack down on the name of “business, employment,” under the guise of “recruitment” “introduction work” in the name of fraud in school students to participate in pyramid schemes, Organization; focus on investigating and investigating students to participate in MLM major cases, the case, severely punish the organizers and key elements, destroy the MLM network; investigate and deal with direct marketing enterprises in violation of the recruitment of students behavior; strict norms online and offline employment information business, Seriously deal with the spread of information on the site, severely punish false advertising; strengthen the rental housing management.

The third stage (November 1 – November 15), in a timely manner to carry out special work on the promotion of marketing activities to sum up, and establish a sound long-term mechanism.

Fourth, safeguard measures

(A) to strengthen leadership. Under the unified leadership of all levels of party committees and governments, we will establish and improve the consultation system of inter-departmental pyramid selling information exchange, and all departments should work together to form a crackdown on pyramid schemes.

(B) duty-free. Industry and commerce and market supervision departments should strictly investigate and deal with cases of pyramid schemes, strengthen the prevention of pyramid selling propaganda, including college students, including job seekers away from MLM, refused to MLM capacity. Social and social departments to strictly regulate the recruitment of business operations, investigate and deal with the relevant violations; to enhance the students and other special job seekers in the job search process of the ability to identify and prevent awareness. Education departments should increase the employment guidance of students in school education, prevention of pyramid schemes, to assist industry and commerce and market supervision departments, the public security departments to do the students to persuade and persuade. The public security departments to increase the use of recruitment activities for pyramid selling criminal acts of crackdown, quick detection break fast key cases.

(C) strengthen publicity. All localities should firmly grasp the guidance of public opinion, make full use of news media and other promotional resources, issued warning tips, anti-MLM public service advertising, published typical cases, exposing the nature of criminal activities, the usual means and serious harm; coordination platform and network media, Timely propaganda work to get rich, educate people to establish a correct concept of enrichment; propaganda to combat the results, to improve the legal concept of the masses and to prevent the masses of the people, awareness.

State Administration for Industry and Commerce
Ministry of Education
Ministry of Public Security
Ministry of Human Resources and Social Security
August 10, 2017

– Source Translated By Google


It looks like the MLM bribes in China were not large enough. Their days of exploitation may be coming to an end. We will see what happens.