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China Authorities Launch Website to Drive Out Dodgy Platforms

By Guglielmo de Stefano on 15th February 2016

Nikolaj Potanin,

The Chinese Ministry of Public Security (MPS) is reported to be about to launch a website that allows investors to report to the authorities the name of dodgy peer-to-peer platforms, according to China news.


The launch of the website follows on from the recent blow up of a Chinese peer-to-peer platform by the name of Euzubao  - one of China’s highest profile peer-to-peer lending sites, launched in 2014. According to the authorities, Ezubao hit investors for the astonishing amount of Rmb50 billion ($7.6bn) - the largest sum of money lost by peer-to-peer investors to date. In that occasion, 20 people were arrested in connection to what appeared to have been a sizeable Ponzi scheme.


The website was allegedly being designed to aid authorities to detect fraudulent platforms and will be the basis for investors  - who were swindled out of money - to receive compensation for their losses. However, priority will be given  specifically to  Ezubao’s investors until May 13th, according to the MPS.


AltFi has extensively investigated the Chinese alternative finance space, through an interesting interview with Spencer Li, VP of Product at Fincera. What emerged is that the UK and US peer-to-peer lending spaces are fundamentally different to the Chinese market, in term of size, platforms’ valuations (i.e.: Lufax), transparency and regulation.


The latter point deserves more attention. Chinese platforms would appear to be simply online manifestations of the older “shadow banking” system and to operate beyond the scope of formal oversight. In addition, mainland police are preparing to contain the risks from runaway online private lending as more scandals and defaults are expected in the middle of this year. Many fear there’ll many failures partly because of the absence of efficient risk management systems, according to the South China Morning Post.


Gregory Gibb, chairman of the Shanghai Lujiazui International Financial Asset Exchange - which operates P2P platform – revealed:


“It will take a long time before the P2P market finds a sustainable growth model. We believe the mainland’s Internet finance sector has entered into a phase when rectifications are much needed,”


Although the website was launched deliberately to help investors after Ezubao blow up, it will be also used for other major illegal fund-raising cases in the future. We’ll definitely continue to keep an eye out for the Chinese P2P lending space.


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