Tang Ning has been feeling the heat lately in his role as head of the association that represents peer-to-peer (P2P) lenders in Beijing after a wave of platform defaults plunged the industry into crisis. While he cautions investors to exercise better judgment to avoid fraudulent platforms, Tang insists that P2P is a solid investment method with a proven track record in China and overseas for more than a decade. The reputable P2P platforms focus on diversified investments to safeguard returns, said Tang, who is chief of the Beijing Internet Finance Association and founder of CreditEase, one of the largest P2P leaders in China. “The recent wave of defaults has been magnified greatly, especially by [bloggers],” Tang said, adding that the “exaggeration of severity among P2P defaults” created a state of “panic” that adversely affected the industry’s development. Investors rue losses amid fraudulent P2P lenders’ collapse China’s 1.3 trillion yuan (US$191 billion) P2P sector is undergoing a massive shakeout, with hundreds of lenders collapsing or exiting the business over the past two months, leaving consumers from all walks of life unable to withdraw their money from platforms that had promised much higher returns compared with traditional financial institutions. As many as 114 P2P platforms failed from July 1 to July 24, with 14 shutting down without warning, 97 suspending fund withdrawals after facing liquidity problems, and three under official investigation, according to online P2P data provider Wangdaizhijia. In contrast, there were a total of 217 cases for the entire 2017. Tang said the troubles experienced at some P2P platforms, which charge a service fee to match borrowers and depositors via the internet, have traumatised the entire industry, prompting many investors to rush to withdraw funds that has seen a liquidity crunch similarly to a “bank run”. In Hangzhou, a wealthy city known for its buoyant online lending activities, officials have converted two sporting stadiums to accommodate local and out of town P2P investors filing grievances and seeking a solution. Eight Chinese ringleaders charged over US$9 billion Ponzi scheme George Li, a 24-year-old white collar worker for a technology company in Beijing, lost 60,000-yuan – two years worth of savings – after he put the money in a Shanghai-based P2P platform called Lianbijinrong, which suddenly suspended withdrawals last month. “I should never have put all my eggs in one basket. I don’t think I will trust P2P platforms any more,” he said. Chinese smartphone maker Xiaomi, known for its promotions and sales through e-commerce outlets, has pulled all P2P advertisements from its online platforms after more than 420 investors filed complaints, some seeking Xiaomi’s help in getting a refund, according to a report from Tencent News on Tuesday. The amount involved has reached 40 million yuan, but Xiaomi was quoted as saying it only hosted the ads and had no relationship or profit sharing with the P2P platforms. It is not the first sign of consolidation in China’s P2P lenders. The number of such platforms have declined from 3,800 in 2015 to 1,836 in June this year. Shanghai savers sound the alarm as more P2P lenders fail to return funds Tang said the recent panic means all platforms, including market leaders, need time to recover because cash inflows are significantly lagging outflows. He said the P2P association is working with platforms to find a solution and help affected consumers get their investments back. Although Tang remains optimistic on prospects for P2P lending because of the buoyant demand from micro-borrowers, he said consumers need to make rational investment judgments and identify authentic P2P companies over fraudulent platforms. In 2015, Ezubao, one of China’s largest P2P platforms at the time, was charged with running an illegal Ponzi scheme after it raised 76 billion yuan from more than 900,000 savers in less than two years, paying out profits to earlier investors by using funds obtained from newer investors.