China recruits state-owned banks to save troubled P2P sector

FINANCIAL regulators in China have consulted with state-owned asset managers to help resolve a crisis emerging in the country’s peer-to-peer sector, according to reports.

Hundreds of P2P investors have faced issues with withdrawing funds, defaults or platform owners simply disappearing, which has pushed other investors to pull money out, leaving firms struggling to meet requests and often having to close down.

This has resulted in protests and complaints about platforms as people have lost their life savings.

Read more: China tightens P2P regulations with new registry

Now, Reuters and the Financial Times report that the China Banking and Insurance Regulator has asked four state-owned asset management companies, set up decades ago to bailout out China’s commercial banks, to step in to help P2P lenders.

It comes at a time when China has been attempting to regulate P2P platforms but has faced problems getting platforms licensed.

Reuters reported that at least 243 P2P firms have gone bust since June.

The Chinese P2P sector has been hit by several scandals that have resulted in platforms closing and investors losing funds.

The highest-profile case saw P2P platform Ezubao operate a Ponzi scheme to raise over 58bn yuan (£6.7bn) from 901,294 investors.

A lack of safety standards is said to have caused multi-billion pound losses to investors since the end of 2015.

Read more: What we can learn from China’s flawed P2P sector