China’s P2P purge leaves millions of victims out in the cold, with losses in the billions, as concerns of social unrest swirl
- The shroud over peer-to-peer lending firms has fallen, and China’s banking regulator says all such platforms across the country have ceased operations – but many life savings are feared lost
- Just a few years ago, P2P lending platforms were touted as a model to reshape China’s financial landscape, but a lack of regulations saw fly-by-night operators run amok
Karen Kong has not got a restful night’s sleep in the past half a year, after learning that her mother invested all of the family’s savings – more than 1 million yuan (US$153,000) – in a little known peer-to-peer (P2P) lending platform.
Worries soon turned into anger and despair as the Beijing-based Jieyue United made its way onto the Chinese government’s liquidation list, and the chance of getting their money back appears to be dwindling.
“No one can give us a clear timetable for the settlement, or even a reply,” she said, pointing to a stack of petition papers signed by investors, appeal letters and photocopied evidence – all of which were rejected by local government agencies in Beijing.
“A lot of the investments are life savings and the pensions of senior citizens. How can they make a living,” asked Kong, who lives in the eastern province of Shandong. “They must give us an explanation and a solution.”
The shroud over P2P firms has fallen, with China’s banking regulator announcing last month that it had shut down all such platforms. However, the financial time bomb is far from being defused for millions of families who invested billions of yuan, and a very real concern exists that mishandling the situation could lead to social unrest.
Countless investors are anxiously waiting for their life savings to be returned, trying every means – reporting to police, filing complaints and lawsuits, and even protesting in the street – to get back as much as possible.
The regulator said in August that about 800 billion yuan (US$122.7 billion) worth of investor funds have not yet been retrieved.
The first of China’s P2P platforms sprang up 14 years ago, and the industry experienced explosive growth after support for internet financing was written into the government’s 2014 work report. Beijing hoped they would lead to greater financial inclusiveness and help solve the decades-old funding problems for small businesses.