Peer-to-peer investors in China are facing collective losses of more than 800 billion yuan (£88bn) in unpaid debt from failed platforms, the head of the country’s banking regulator has reportedly said.
Guo Shuqing, chairman of the China Banking Regulatory Commission, said on China Central Television that regulators will work with the police to try and recoup the money, according to a Bloomberg report.
China has been cracking down on its P2P lending industry for years following fraud scandals and huge defaults.
This has reduced the number of platforms operating from around 6,000 to just 29, according to Shuqing, quoted by Bloomberg.
At its peak, China’s P2P lending industry had almost 50 million investors and £115.bn in debt outstanding.
However, a flurry of scandals led to President Xi Jinping’s crackdown on financial risk in the sector which caused the industry to shrink in size.
The highest-profile case saw P2P platform Ezubao operate a Ponzi scheme to raise over 58bn yuan from 901,294 investors.
Despite the reputational hit to the industry, Chinese P2P lender Lufax is reported to be working on an initial public offering in the US.
If it were to list, Lufax would follow China’s oldest P2P lender Ppdai.com which floated on the New York Stock Exchange in 2017.