Political analysts said that the Chinese Communist Party (CCP) is blaming P2P lenders for plundering the life savings of the Chinese and that the confiscated money could be seized by the CCP itself rather than being used to compensate victims for their losses.
CCP authorities began advocating P2P lending platforms in 2013, with multiple state-owned media reporting that this online loan platform could help ease financing challenges and meet the demand for private capital investment. In 2015, then-Premier Li Keqiang endorsed Internet finance, providing high-level support for P2P during his visit to Shenzhen with several ministries and commissions, including the Ministry of Finance, China Banking Regulatory Commission, and China Securities Regulatory Commission.
Official publications gave credibility to the P2P lending platforms, which then attracted large amounts of investment from private individuals.
As of 2018, the scale of China’s P2P industry reached 1.3 trillion yuan (about $184 billion), with 50 million registered users. There were 1,836 online lending platforms across the country at that time, according to Chinese state media.
Mr. Tang believes that the risk control measures implemented by P2P platforms, such as bank deposits and the ICAgile Certified Professional (ICP), an industry-recognized credential, are ineffective in protecting investors’ interests when operators misappropriated or absconded with large sums of money, “this can be partly attributed to a dereliction of duty by the CCP regulators.”
Several P2P Operators Jailed for Life
On Dec. 7, Zhou Shiping, known as the “godfather of Chinese online lending,” was sentenced to life in prison and confiscation of all personal property by a Shenzhen court for fraudulent financing. Seventeen accomplices were sentenced to prison for less than 11 years.The 55-year-old founded Hongling Capital in 2009 and used it to attract roughly 109 billion yuan (about $15.3 billion) from over 480,000 private investors.
Lin Wenfeng, the founder of Shenzhen Wenshenwei Investment Co. and Shenzhen Gongxinying Financial Information Service Co., is another P2P lender who will remain in jail for life and be stripped of all his property for illegal financing and fraud.
Mr. Lin and his 11 accomplices were convicted of illegally collecting public deposits of 38.6 billion yuan (about $5.38 billion) from over 150,000 investors through P2P loans and private lending, by a Shenzhen court on Nov. 29.
Mr. Lin has held leadership positions in the Industrial and Commercial Bank of China, the Export-Import Bank of China, and the China Merchants Bank, and he was once the president of Hong Kong Satellite Television and the chairman of the Shenzhen Golf Club.
On Nov. 14, He Yuan, a lending businessman famous for his “red” series of financial products in Shanghai, received a life prison term and a financial penalty of 3.4 million yuan (about $474,000).
Mr. He was accused of deceptively selling financial products through his companies, such as Hoomsun (Shanghai) Investment Management Co., to more than 41,100 investors. He drew in a total of more than 8.9 billion yuan (about $1.25 billion) of investment funds, according to the Shanghai court verdict.
On Nov. 3, the Guangdong Provincial High Court issued a final ruling, dismissing the appeal and upholding the original verdict on July 14, when the Shenzhen Intermediate Court handed down a decision on 26 suspects, including Peng Tie, the CEO of Neo Capital Management Group, for illegal financing and fraud worth 102.6 billion yuan (about $14.3 billion) through P2P loans and private financial products.
Mr. Peng was sentenced to life imprisonment and confiscation of all personal property; others received imprisonment under 11 years.
The Guangdong authorities arrested Mr. Peng and dozens of his colleagues, froze their accounts, and confiscated 1,056 properties in January 2021.
Victims’ Loss and CCP’s Guilt
Although the Chinese court has heavily punished online lenders and confiscated their assets, the victims don’t seem to be recouping their funds. Chinese lawyers indicated that in such cases of illegal financing schemes, if the money cannot be refunded by the end of the case, victims are not protected and must shoulder the loss themselves.Liu Yanlin (a pseudonym), a financial specialist in China, told the Chinese Language of NTD TV that the CCP previously promoted P2P platforms, and facilitated the packaging and sale of bad loans to P2P platforms.
“Then, the CCP government tacitly allowed the P2P platforms to package these non-performing loans and sell them to uninformed small investors. The investment funds [raised by the platforms] eventually went to the banks, and the financial crisis was passed on to the Chinese people.”
Mr. Tang said, “To put all the blame on the heads of the online lending platforms is more politically motivated than economically meaningful as the CCP cannot find a way out of the economic crisis.”
