Risky business of P2P lending and a ‘battle we must not lose’

Zhou Qinye is one of the lucky ones. A slight uptick in the stock market late last year after the turmoil of the summer prompted her to rethink her investment in the financial firm Ezubo and move most of her funds elsewhere.

It proved a shrewd move. On December 8, authorities began investigating the firm – one of China’s largest online peer-to-peer lenders – on suspicion of illegal operations.

The investigation was part of a drive by the central government to improve the scrutiny of risk in financial investments – on behalf of both regulators and members of the public like Zhou.

In Zhou’s case, the property professional from Shanghai had been persuaded by a friend who worked for Ezubo to invest more than 200,000 yuan (HK$240,000) in its products.

Like many Chinese investors, she was lured by promises of high returns from the firm’s wealth management products – even though she had little knowledge of how the company used its funds.

“I felt uneasy because the rates of return Ezubo promised – nine to 13 per cent – seemed too high and unrealistic in the sluggish economy. When the stock market rebounded slightly in early October, I withdrew half my investment,” she said.