New P2P lending problems emerge
Jiangsu-based online peer-to-peer (P2P) lending firm Easy Richness, which reportedly has drawn more than 10 billion yuan (1.55 billion dollars) in investment, said it was unable to pay back investors as the company’s bank accounts have been frozen by police, the company said in a statement posed on its website Wednesday.
It came after the Shanghai branch of the Beijing-based online P2P firm rowerp2p.com, which has over 10,000 investors and more than 10 billion yuan in investment, was reportedly investigated by the police because of illegal financing, domestic news portal yicai.com said Tuesday.
Rowerp2p.com immediately denied the probe in a statement posted on its website late on Tuesday. But problems can undoubtedly be seen in the company’s business, news portal sina.com.cn reported Wednesday, citing an employee.
There have been a number of scandals and operating problems in China’s growing online P2P lending sector recently.
In the first quarter of 2016, about 260 P2P platforms reported problems in their business operation, up 42.08 percent year-on-year, news portal cngold.com.cn said Monday.
Also, Ezubao, one of the largest domestic online financing platforms, was found in February to have cheated about 900,000 investors out of more than 50 billion yuan through fake investment projects.
The problems among P2P firms is partly due to the lack of scrutiny of their qualifications and inadequate supervision by the relevant authorities, Lu Zhenwang, founder of Shanghai Wanqing Commerce Consulting, told the Global Times Wednesday.
It is too easy for fraudulent firms to enter the market, "as supervision of relevant certificates and licenses is not strict and there is not enough regulation," Lu said.
Shen Zhongxiang, an industry analyst at Beijing-based market research firm Analysys International, agreed, saying that China’s currently underdeveloped credit rating system is another factor contributing to problems in P2P lending.
"The risk prevention system should [also] be improved in the domestic capital market," Shen noted.
"By presenting themselves as P2P firms, some companies have swindled money from investors by offering them fake projects, resulting in large losses for the investors," Lu said.
2015 saw a sharp rise in the number of P2P platforms operating across the country. The number of online lending platforms reached 3,844 in the domestic market, but about 950 of them were found to have problems in their operations, up 221 percent on a yearly basis, Beijing-based Legal Daily newspaper reported Tuesday, citing industry data.