Viewpoint: Regulators Should Leave China’s P2P Sector Alone
Tuesday, February 23, 2016
I got into a shouting match with my 83-year-old father-in-law the other day in Shanghai. He had invested 300,000 yuan ($45,940) in Zhongda, an obscure peer-to-peer lending company based in Zhejiang Province. So far he has not suffered a loss from his adventure but he has refused to pull his money out despite my insistence that he do so.
My father-in-law does not fit the stereotype of an unsophisticated Chinese senior citizen. He was a senior engineer at China Petroleum & Chemical, known as Sinopec, before retiring over two decades ago. Since then, he has played the stock market and the housing market with mixed results.
While the exposure of P2P site eZubao in January as a Ponzi scheme that had hoodwinked about 900,000 people into investing $7.6 billion for what turned out be largely imaginary ventures was a shock for many outsiders, for the vast majority of the Chinese public, it was just another familiar episode.
In the past two years, several hundred similar sites have gone bust, voluntarily shut down, or been forced to close by the government, costing small investors enormous sums and great pain. Both the government and social media have done a great job of exposing the dirty tricks of unscrupulous P2P operators.