The regulatory crackdown on Chinese online lenders caused a climate of heightened tension in Beijing today, where investors who have lost their savings were trying to take their grievances to the street.
Recent crackdowns on China’s online lending industry have caused some unrest in Beijing today, where planned gatherings by victims who were trying to draw attention to their misfortune were immediately shut down by authorities.
Companies they’ve invested in were either closed down, or the directory boards have simply abandoned their business and have taken off (跑路).
Today, WeChat and Weibo have been buzzing with rumors of people being victimized by the P2P crackdown attempting to gather and protest in various places – one of them being in Beijing.
But local authorities and security guards have been quick to shut down protests, allegedly even barring some travelers from entering the city.
P2P Chaos
China’s P2P industry has seen a quick rise and fall over the past year, causing some panic and chaos.
Earlier this week, China’s New Fortune magazine reported of one case where an investor had just invested 360,000 RMB (±US$52,700) into P2P platform Guojinbao (国金宝), when they discovered the platform was already abandoned the day before, and there was no way to get their money back. It is just one among many recent cases.
Peer-to-peer (P2P) lending (defined as “a method of debt financing that enables individuals to borrow and lend money without the use of an official financial institution as an intermediary“) has experienced unprecedented growth in China over the last 10 years; hundreds of microloan lenders have sprouted up, in place of traditional state-owned banks, to provide funding and capital to everything from companies to individuals.
For many Chinese investors, P2P lending is an apparent attractive alternative investment. Especially because, according to a 2015 case study by the Associate of Chartered Certified Accountants (ACCA), only 9.6% of Chinese people are able to get proper bank loans.
Since China’s mushrooming online lending companies were largely unregulated before, the rise of P2P in China has also given way to a great number of ‘troubled’ companies and lending scams.
(Note: to understand more about the rise and fall of China’s online P2P lending, read this insightful overview by Jiefei Liu at Technode. Also check out our background article “The “Wild West” of Banking in China: Andrew Collier on China’s Shadow Banking” here“.)
As of this year, China’s central government has enacted stricter rules to protect against these kinds of shady business dealings, which have already affected hundreds of thousands of investors.
Stricter monetary policies and renewed regulations have led to a wave of closures this year.
On August 2, TechNode already reported about responses to the crackdown, with people protesting in front of police stations, organizing online investor rights groups, and making collective efforts to pressure authorities to get their money back.
P2P Protests
These responses now seem to intensify. The overseas Chinese community website Boxun reported about a planned protest march in Beijing on August 6, among others near Ritan park, which was cracked down by local authorities.
Alleged bystander videos showed how people were forcefully taken away by police (video and video and video) or how people were questioned on the train to Beijing (video) (NB! We have not been able to verify if these videos were indeed recorded today, we just know that the people posting them on WeChat/YouTube claim they are).
There were also reports of people being taken away on public buses. “Have truly never seen anything like this in Beijing. We counted 120+ buses at site of the (failed) protest against P2P lending fraud, stretching far as the eye can see – all the way to Diaoyutai. Cops nap, wait in each. Petitioners rounded up, shipped off inside. The SCALE..!,” Becky Davis (@rebeccaludavis), China Correspondent for Agence France-Presse, tweeted on her timeline.
A Twitter account named “P2P China Right” (@P2Pweiquan) posted: “As a result of the government’s powerful police force and strict guard, hundreds of buses are waiting at the gate of the CBRC, About 10000 people were forced to take the bus. Announcing: the 8/6 event failed!”
Although today was an especially charged day, it is not the first time Chinese authorities are cracking down on P2P platforms. In October 2015, Chinese authorities already introduced new regulations to reduce lending fraud.
In 2016, more P2P lending companies closed operations as a result of these new regulations. Most notably was Ezubo, a ponzi scheme disguised as a peer-to-peer lender, which allegedly defrauded more than 900,000 people.
By Manya Koetse, Miranda Barnes, and Ryan Gandolfo.
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