China’s P2P purge leaves millions of victims out in the cold, with losses in the billions, as concerns of social unrest swirl

Frank Tang
·7-min read

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.

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“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.”

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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.

In short, P2P lending platforms were touted as a model to reshape the nation’s financial landscape.

More than 10,000 such online platforms sprang up in China, government data showed. In their heyday, these companies occupied luxurious offices in big cities, and some extended their operations to remote counties, with annual transactions valued at 3 trillion yuan (US$460 billion).

CreditEase, one of the world’s first P2P companies when it launched in 2006, even rang the opening bell at the New York Stock Exchange in December 2015, to celebrate the initial public offering of Yirendai, its online platform. The stock price surpassed US$50 in October 2017. Today it is worth just over US$3.

The turning point for the sector indeed came in late-2017, when China’s leadership recognised the growing risk associated with numerous fly-by-night P2P platforms and vowed to squeeze them out of the financial system. Guo Shuqing shouldered the de-risking task in his dual role as chairman of the China Banking and Insurance Regulatory Commission and as party chief of the People’s Bank of China, the nation’s central bank.

Speaking at the Lujiazui Forum in June 2018, he flagged the large risk embedded in the high return products offered by P2P platforms and warned that many could be illegally raising funds, or were simply Ponzi schemes, using new income to pay off older investors.

If [a product’s promised] return is above 10 per cent, you should be prepared to lose all of your principal

Guo Shuqing, party chief of central bank

“You need to question [a product] if its return surpasses 6 per cent. If its return is higher than 8 per cent, the product is dangerous. If its return is above 10 per cent, you should be prepared to lose all of your principal,” Guo said.

According to, which compiles data on P2P platforms, about 56 per cent of their investors are salary earners, mostly with undergraduate degrees and monthly incomes ranging from 5,000 yuan (US$767) to 10,000 yuan.

Fraser Howie, co-author of Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise, said the popularity of P2P platforms highlighted how Chinese “innovation” used mobile connectivity to carve out a niche business when the banking sector was not adequately serving the needs of the private sector nor those of a consumer base seeking returns on their investments.

However, “the elites don’t suffer when all the laobaixing [ordinary people] lose their savings in get-rich-quick schemes,” he added.

In Kong’s case, she said about 80,000 investors tried to retrieve 14.1 billion yuan (US$2.2 billion) from two platforms of Beijing-based Jieyue United, and many of those individuals are financially and technologically unsophisticated senior citizens struggling amid the coronavirus shock.

A 71-year-old victim’s tale reveals extent of greed in China’s US$30 billion peer-to-peer lending fiasco

Panic set in among the group after they were told that they might be able to retrieve only 20-30 per cent of their original investments, leaving them with few options – none of which will see them made whole again. Adding to their frustration is that Kong says they have been left in the dark about how much money remains for repayment, even though the government has stepped in and taken over the accounts.

“We demand an open and equal dialogue with the government disposal team,” says an appeal letter representing about 200 investors, including housewives, apple farmers, seafood traders and small businesspeople, who claim they are owed a combined 60 million yuan. “The fraud must be investigated, while loan recovery and repayment data must be published regularly.”

The Post was unable to independently verify such claims, but similar problems are widely said to be plaguing investors in all of the platforms awaiting liquidation.

As a result, demonstrations have been staged, including in Beijing’s financial district, over the past two years. At times, police have intervened to quell the crowds.

You realise how humble you are as an individual. Eventually, it’s us, the most humble citizens, who pay the price

Ivy Meng, Shaanxi province

“We must unite together and show our determination,” an investor in the Nasdaq-listed financial services company 9F Group wrote this month on Weibo, China’s equivalent to Twitter, as hundreds of people protested outside the company’s Beijing headquarters. A video clip of the incident circulated on social media.

A survey by indicated that investors primarily want to know more about repayment details, including the timetable, and who is supervising the process. About 58.3 per cent of investors said they could accept a “haircut” but insisted that it must be less than 30 per cent. Nearly a third of respondents rejected the idea of not recouping all of their losses, and the remaining respondents were open to alternatives.

No details have been made public on the size of haircuts sustained in previous resolutions, but they are thought to vary depending on the financial capability of controlling shareholders, government endeavours and the bargaining power of individual investors.

Details gleaned from those involved in earlier cases suggest the process is likely to be lengthy, with only a small chance of retrieving losses. And as time goes on, the bargaining power of individuals seems to wane.

Beijing’s P2P owners and senior executives hit with travel ban as China cracks down on online lending

Ivy Meng’s mother in Shaanxi province invested all her life savings in a platform called Jucaimao, which Shanghai police investigated in 2018. Meng said not a single penny has been recouped by investors.

“This is the cruel reality. We have largely given up,” she said, trying not to recall the traumatic experience. “You realise how humble you are as an individual. Eventually, it’s us, the most humble citizens, who pay the price.”

Meng, however, also said she did not believe there would have been such large-scale defaults and collapses if regulators had not rushed to reduce debt in the financial system.

Two years ago, thousands of desperate P2P investors occupied Beijing’s Financial Street, where the office of regulators is located, and which is only hundreds metres away from the Zhongnanhai leadership compound.

This served as a sign of the threat posed to social stability, and it helped justify the subsequent nationwide purge of P2P platforms.

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