China’s peer-to-peer (P2P) lending crisis has caused widespread anger from citizens who are demanding that the government bail out hundreds of collapsed P2P companies. Last week, it was reported that China ordered a lockdown of Beijing’s financial district to prevent individuals from protesting a crisis in the P2P lending marketplace.
According to Reuters, one protest planned in Beijing last week fizzled out because protestors were picked up by the police and carted away to Jiujingzhuang, a holding center for petitioners outside of Beijing.
“Once the police checked your ID cards and saw your petition materials, they knew you are here looking to protect your rights. Then they put you on a bus directly,” said Peter Wang, an auto repair shop worker.
Wang was asleep at his home last Monday (Aug. 6) when police officers arrived before dawn to detain him, saying he had helped organize a protest for later that day. He joined a separate, smaller protest in a different part of Beijing after his release.
“There was no channel to solve any problems,” he said. “All they care about was preventing any disturbance.”
The size of China’s P2P industry is bigger than in the rest of the world combined, with outstanding loans of 1.49 trillion yuan ($217.96 billion USD). The industry was nearly unregulated and at its peak in 2015, when there were about 3,500 P2P businesses in the country. However, a combination of regulatory failures, fraud and the declining debt is being blamed for the shuttering of 243 online lending platforms since June.
“A fair share of the recent P2P thunderstorm comes from lawless people operating under the guise of internet finance to commit fraud,” said Ben Shenglin, dean of the Academy of Internet Finance at Zhejiang University in Hangzhou, in a recent Financial Times report. “Beyond that, overall economic conditions have deteriorated, and then you add the impact of the deleveraging campaign, which means some legitimate platforms can’t find a profitable niche.”
Many P2P lenders shut down rather than face tougher regulations, noted Zane Wang, chief executive of online micro-loan provider China Rapid Finance, according to Reuters. He added that larger lenders are doing better.
“Some platforms might become a winner out of this, and some platforms — probably a large portion of the platforms — might not be able to make it,” he said.
No mainland Chinese media reported on the planned protests, and China’s propaganda machine has swung into action as the government works to reassure people that the Chinese economy and financial markets are healthy.