China has started shutting down the popular internet finance platform P2P (peer-to-peer lending) since 2018. Just five years ago, P2P, with the backing and promotion of the Chinese regime, became the cutting-edge investment product in China, drawing trillions of funds from private investors. However, P2P has been plagued with collapse and scandal, robbed millions of Chinese of their life savings and even caused some victims to commit suicide.
The ruling Chinese Communist Party (CCP) has started to see the P2P industry and its victims as threats to its political stability and is further cracking down on both of them this year, as shown in the leaked government documents recently obtained by The Epoch Times. The documents and sources also disclosed the secrets behind the dramatic rise and fall of P2P in China and the CCP’s heavy involvement.
As early as November 2013, Communist Party leader Xi Jinping announced the “Decisions of the Central Committee of the Communist Party of China on Several Major Issues of Comprehensively Deepening Reform,” formally proposing to “develop inclusive finance and encourage financial innovation” at the Third Plenary Session of the Eighteenth Central Committee of the CCP. Internet finance, as a product of inclusive finance, quickly gained popularity among local governments of various provinces and cities, and developed very quickly. As a segment of internet finance, P2P was praised by the then governor of the Central Bank of China, Zhou Xiaochuan, in an article published in the central bank’s media China Finance in October 2015. Zhou said in the article that “the Party Central Committee and the State Council encourage and support the development of internet finance.”
According to industry data, the P2P started to emerge in mainland China in 2007. In 2012, there were only about 160 platforms in the five years. However, since 2013, the number of P2P platforms surged to more than 10,000 in 2018. There were more than 6,000 included in the official statistics and the financing scale exceeded trillions of yuan.
P2P Platforms: Government Backed Ponzi Schemes
A senior financial expert in mainland China, who goes by the name of Liu Yanlin, in an interview with the Chinese language Epoch Times earlier, revealed the reason behind the CCP regime’s strong support for P2P back then. In 2013, China was facing a financial crisis, state owned banks had a huge number of bad debts. The CCP needed to pass on the financial risks to someone else, so it began to foster P2P.
Liu explained the key to the CCP’s P2P games: the CCP officially advocated P2P online finance, and at the same time, the bad assets that should have been written off as bad debts were repackaged into P2P wealth management products to sell to the Chinese people. Moreover, it loosened up financial supervision and even gave P2P platforms easy access to the fund pool so that the CCP can conveniently play the Ponzi scheme by borrowing the new debts to pay for the old.
Liu pointed out that when the risk was passed on to the people who bought the P2P products, the CCP began to tighten its internet financial policy, preparing to puncture the P2P bubble and let it explode. The P2P platforms and the government that backed them just took away the money, while people who invested in the P2P suffer the loss.
“Ezubao” was the typical example of such P2P schemes. Its victims’ attempts to get justice and compensation were identified as organized threats and “should continue being highly concerned,” according to the leaked document of Fuyang Public Security Bureau’s report in 2020.
“Ezubao” was established in July 2014. With the endorsement and promotion of the CCP’s official media such as CCTV, it defrauded nearly 60 billion yuan from the Chinese people in just over a year, and the total amount involved was more than 70 billion yuan. Millions of investors (lenders) lost their life savings. Due to heavy losses and no way to defend their rights, many victims of ezubao have committed suicide, according to a report by Radio Free Asia.
More Chinese P2P platforms have collapsed, causing heavy losses to investors. The CCP proposed the “Implementation Plan for the Special Rectification of P2P Network Lending Risks” in April 2016, requiring all regions to start rectifying P2P platforms. However, the 2016 remediation plan mainly emphasized on the “comprehensive investigation, finding out the bottom line” and “strengthening the guidance of public opinion,” nothing about protecting investors’ rights and helping the victims. In practice, the CCP had continued to condone P2P expansion and allowed the bubble to burst.
The Chinese regime’s direct involvement in the P2P can also be found in mainland China’s own media reports. According to a report by China Times in June 2016, the Wannian county government of Jiangxi Province established the province’s first county-level P2P online lending platform in April 2016. The platform was led by the local government and wholly owned by the government, and cooperated with Jiangxi’s largest P2P platform “Bojindai” to establish a subsidiary.
Wannian county may be the first CCP local government to openly participate in the operation of P2P, but it is not an exception. More local governments and influential people, like financial sharks with ties to CCP officials, were lurking behind the P2P scene.
In 2018, the United States launched a trade war to counter the CCP’s economic aggression; at the same time, the negative consequences of China’s shared debt stimulating the economy strategy began to erupt. Under domestic and foreign difficulties, China’s debt crisis has deteriorated rapidly, the capital chain of internet finance has been broken on a large scale, and P2P has become a minefield. In the same year, the CCP started cracking down on the P2P sector, as it saw the large number of P2P victims as a threat to its political stability.
P2P Is a ‘Stability’ Issue for the CCP
Since 2018, the CCP has started cracking down the P2P sector through tightened regulations and put more efforts on the oppression of P2P victims. In 2020, the CCP continues to eradicate it, which shows clearly in the internal documents of different regional governments. Instead of helping the victims, the CCP sees them as a potential threat to its stability that needs to be squashed, ordering local governments to be on high alert and preventing them from organizing to protect their rights and seeking compensations, as the recently leaked government documents reveal.
For example, the Anhui Mutual Financial Remediation Office issued the “Notice on Quickly Filling in Information Related to the Disposal of Stock Business” on April 3, 2020, and the “Notice on Establishing a System for Reporting the Progress of Disposal of Stock Business of Discontinued Online Loan Institutions” on Aug. 20—both documents show the CCP continues to shut down the P2P platform this year.
In October 2019, the “Notice on Transferring Mass Complaints” forwarded by the Anhui Provincial Mutual Fund Remediation Office to Fuyang city showed that P2P victims had nowhere to ask for help, despite reported cases to various government departments. And they were blocked from requesting investigations. Some victims were preparing to rally to defend their rights, and they were being “stabilized” (cracked down upon) by the authorities.
According to a report by Chinese news portal Sina on Aug. 14, Guo Shuqing, Chairman of the China Banking and Insurance Regulatory Commission, admitted that there are currently only twenty-nine P2P platforms in the mainland, and more than 800 billion yuan loan funds remain lost.
Current affairs commentator Li Linyi pointed out that the 800 billion funds of the Chinese people were defrauded by the P2P platform and the black hand of the CCP, and powerful people behind it. The CCP does not investigate P2P fraud or pursue the defrauded funds. Instead, it strives to suppress the victims who lost their life savings. It is difficult to imagine how many people have fallen victim to it. The possibility of these people organizing to defend their rights and fighting to get back their hard-earned money is what the CCP fears most.