By Oiwan Lam
Similar to the spread of toxic smog, the protests against finance “scams” on peer-to-peer (P2P) lending platforms have been sweeping across China over the last month.
P2P lending platforms, also known as crowdlending, attract individual and business investors with promises of high rates of return. According to an industrial insider’s report, by November 2015 there were about 3,769 P2P lending sites, but 1,157 of these sites were “problematic” involving fraudulent investments.
One of the problematic sites under investigation is Ezubao, the biggest online finance firm in China which has built its reputation through a series of ads on state-run China Central Television (CCTV). The site attracted more than 74 billion yuan (approximately US$11.5 billion) from about one million small investors in a span of 18 months. Since authorities raided the site’s office on December 8, there have been no reports on the investigation and the investors have yet to find out the whereabouts of the money they handed over.
Since December 9, tens of thousands of small investors from Ezubao have gathered outside the company’s offices in various provinces demanding the return of their investments. On December 19, hundreds of investors protested outside the Beijing World Trade Center and some were arrested by police. On December 22, protesters then demonstrated outside the headquarters of CCTV for their misleading television ads that lured people to invest their savings in Ezubao.
However, news of the protests went unreported on mainstream media outlets and censored on social media platforms, as pointed out by user Gushequ on Chinese Twitter-like Weibo:
Apart from media censorship, the police received instructions to contain the national protests over Christmas. @hailu-1121 posted the instruction on Twitter:
— 纸飞机✈ (@hailu_1121) December 25, 2015
The public security department has issued six instructions on the Ezubao incident: prevent petitions taking place in Beijing; prevent mass incidents that result in the occupation of party and government offices; prevent cross-regional mass protests; prevent destructive behaviors that target the company offices; prevent individual extremist behavior; prevent acts that affect political stability and the investigation.
Protests of Ezubao’s investors reportedly broken out in at least seven provinces and 34 cities all across the country during Christmas, but their demands that investigation reports be made public and they receive a return of their deposit remain unanswered.
‘Everyone needs money’
Online lending has become the country’s third major investment tool. The crowdlending platforms attract small investors with interest rates as high as 10-20%, but the lending businesses’ bad debt rate is also as high as 30%. It was only a matter of time before the sector exploded in some way.
Why would the government allow such an operation to exist in the first place? A business insider explained the economic policy and political motivation behind the blooming of China’s online finance business:
‘It is too late to talk about this’
On December 28, Chinese authorities released the draft of a new regulation on P2P lending, which would require the online finance platform to leave investors’ money in the custody of banking institutions and to set upper limits on each deal and on a borrower’s total outstanding loans.
The new regulation seems to suggest that the problematic P2P lending sites have been operating illegally all these years. Yet, it has been the government’s policy to encourage loan services to small businesses. Many netizens, in particular the victims of online financial scams, have criticized the new policy for shrouding the responsibility of the regulator.
On Chinese Twitter-like Weibo, the outrage are was palpable in the comment section of the news thread: