Privacy / Security

Online lending risks escalate on mainland China amid scandals

Online lending based on internet “big data” was touted as offering greater safety and lower costs, but investors lost more than one billion yuan last year due to the collapse of private lending companies on the mainland.

Over 200,000 people lent a total of 105.8 billion yuan (HK$135.4 billion) on the mainland’s 800 or so peer-to-peer (P2P) lending platforms last year. Seventy-four of those P2P firms reported “operational difficulties, cash squeezes and even owners running away”, with the loss of 1.2 billion yuan of investors’ money, according to Shanghai-based Wang Dai Zhi Jia, a P2P industry information provider.

In the most recent scandal, three P2P lending platforms in Hangzhou, Shenzhen and Shanghai – with combined outstanding loans of 231 million yuan – collapsed, with their final owner, Zheng Xudong, running away, the National Business Daily reported on January 21. Police are investigating the case.

“Internet financing platforms lack sufficient supervision and information disclosures, and involve very high-risk loan business and sometimes also fraudulent activities,” said Zhang Zhiwei, an economist at Nomura Securities. “More of these cases will occur.”

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