Chinese city calls in riot police as angry investors protest outside P2P lender’s headquarters
- Collapse of online lending platform Tuandi.com prompts investors from across country to travel to Guangdong province to demand their money back
- Police have detained 44 people associated with the platform after it went out of business with US$2.2bn invested in it
Thousands of people affected by the closure of a major peer-to-peer lending platform protested outside the company’s headquarters in southern China over the weekend to demand the return of their money.
China’s P2P industry, once touted by the government as an innovative model to help reform the mainland’s finance industry, saw a wave of collapses last year as online lenders grappled with a series of liquidity problems after the authorities moved to tighten regulation of the sector.
The latest protests by people affected by the collapse of Tuandai.com attracted investors from across China, who took advantage of a public holiday on Friday to travel to the firm’s headquarters in Dongguan, a city in Guangdong province.
The platform had about 220,000 lenders and borrowers at the time of its collapse last month due to turnover problems, and about 14.5 billion yuan (US$2.2 billion) had been invested in it by that time.
Since then police have rounded up 44 people from the platform, who are accused of designing fake investment products and “disturbing the country’s financial order”.
A source at the scene of the protests estimated that more than a thousand people had gathered at the firm’s headquarters and surrounding districts.
In response, hundreds of riot police were mobilised in the city and the protests had dispersed by Sunday afternoon.
Videos said to be taken in the city since Friday showed a heavy police presence on the streets, including crowds of riot police.
The city’s Communist Party committee ordered the staff of two dozen departments to work on Friday and Saturday to handle the protests, according to a document seen by the South China Morning Post.
The departments affected included banks, financial regulators, police, state security and internet censors, and they were ordered to keep staff on duty round the clock.
“The investors gathered in the hope the government can intervene and cover their compensation, on the grounds that regulation has been ineffective,” said a local government source, who spoke on condition of anonymity.
Local police have also warned against “spreading provocative rumours” about the incident, saying that those “maliciously provoking the crowd and inciting illegal gatherings” will be held responsible according to the law.
A WeChat post by the police on Friday said that three internet users – one from Dongguan, one from the nearby city of Shenzhen and one from Shanghai – had already been detained for comments made online about the case.
Technically, P2Ps are only supposed to provide information to help match borrowers and depositors over the internet, charging service fees for doing so.
But many of them also collect deposits from individuals, offering them annualised returns of at least 8 per cent, and then lending the money to cash-hungry businesses such as property developers at high interest rates.
But since Chinese President Xi Jinping made reducing financial risk a top priority for the government, regulators have moved to tighten controls on the sector.
P2P lenders are now required to appoint custodian banks and fully disclose how they are using deposits.
According to consultancy 01caijing.com, about 1,200 P2P firms were operating in China at the end of last year, down from a peak of more than 6,000 a few years ago.
Industry players expect only 300 platforms to survive the intensified scrutiny and remain in operation by the end of this year.