China Ponzi Scheme: Central Bank Collects Data on Risks, Funds Deployed

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Chinese YuanThe concern around online lending is global.

As a part of the crackdown on Chinese P2P lenders, the central bank is collecting data on the process of assessing risk and deploying capital for loans made online. The rapid expansion of new players and the subsequent fraud cases that followed, forced the government to take control.

Last week, (May 16th), Chinese authorities arrested Xu Qin, owner of Shanghai-based wealth management firm, Wealthroll Asset Management Co. who confessed that his company still owed 5.2 billion yuan ($797 million) to 12,800 investors. And before that, in April the police arrested 21 executives of Shanghai-based Zhongjin Capital Management, that promised retail investors double-digit returns for short-term projects.

The can of worms was opened with the shakeup of Ezubao, the Chinese P2P lending site which duped 900,000 investors out of $7.6 billion in February this year. Following which, the Chinese police were ordered to shut down illegal online lending sites and take swift action against suspects.

The Ministry of Public Security also launched an online platform in a quest to garner more information from the public and warned of P2P lender defaults in June, when payments will be due.

Last modified: April 20, 2019
Srividya KalyanaramanSrividya's work has appeared in publications like Money magazine, Advertising Age, FirstPost and The Economic Times. She has also dabbled in business intelligence solutions, and holds a Masters degree in Business and Economic Reporting from NYU.

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