The Communist Party of China (CPC) Banking and Insurance Regulatory Commission (CBIRC) claims that by mid-November this year, the number of P2P Internet financial platforms on the mainland had been cleared from the peak of 5,000. But P2P platforms still have 800 billion yuan of bad debts that have not been “zeroed out”
The Chinese Communist Party claims that the P2P platforms have been cleared, but the 800 billion yuan of pending debts are a mystery. P2P is a formal financial institution in the West, but in mainland China it is accused of being a “Ponzi scheme” that is growing like a cancer.
P2P is growing abnormally in mainland China
Dr. Tian Yuan, a current affairs commentator, pointed out to reporters that when P2P was first born in the West, it was a formal financial institution with very strict financial regulations. It is only after the arrival of P2P in mainland China that it has completely changed its flavor, and some platforms can be said to be a Ponzi scheme of lending for lending.
He said that P2P was born in the United Kingdom and the United States, and there were two models when it was first created in the West. The first model is not actually a direct management of money, but a financial assistant agency, a financial advisory agency. If there is a need for a loan, you can find it and what kind of capital is available as a guarantee, and this financial advisor will help find a bank or other institution willing to provide a loan.
The P2P that came out of the U.S. is kind of like a bank loan. For example, he said, the U.S. Landing Club is a high-tech financial company listed on NASDAQ, and its model is very simple, just a bank WebBank, packaged with a network shell, that is, people can go to the bank through the network to apply for loans.
The demand for P2P in mainland China is actually such that this perverse demand has contributed to the perverse development of P2P in China, Tian Yuan said.
First of all because in mainland China, it is a very difficult thing for individuals or small business or small merchants to get a loan. So it gave birth to P2P, otherwise there would have been other semi-underground loans and such to replace it.
The second point is that in terms of technology, the original way of lending was basically limited to the local area, but the development of internet technology, which allows them to borrow money on the internet like people elsewhere, is the factor that objectively gave birth to p2p.
The third reason is that China’s younger generation, especially the post-teenagers, are no longer as frugal as their parents or predecessors in the past, and only know how to save money, they are very serious about this phenomenon of overspending and eating. There are college graduates who owe 200,000, 300,000 or even millions of RMB when they graduate in order to satisfy their personal consumption desires, because of such P2P loans.
Another reason is that since the financial crisis in 2008, the central banks of many countries, including Western countries and China, have even offered negative interest rates, which is equivalent to a collective release of water by the global central banks.
The initial P2P operators guarantee that the principal will not be lost, which is a very attractive clause, and even guarantee to earn at least 10%, 15% interest, this situation makes the profit-seeking people rush to.
As the land media “21st Century Economy” has reported, in the “Wan Ying Finance” platform labeled “100% principal and interest protection, large state-owned enterprises holding investment institutions, fully protect the safety of investors’ capital and income”.
Tian Yuan said that under the strong boost of these four factors, people with spare money in their hands invested their money in this market, which has grown into a market of nearly trillions of dollars at its peak. It turned China’s P2P market into one of the largest P2P markets in the world.
The Chinese Communist Party fears that P2P will cause a financial crisis
In August, Guo Shuqing, chairman of the CBRC, said that the number of P2P players in China had fallen from more than 5,000 to more than 800, but that the number of loans that had not been returned still amounted to more than 800 billion yuan. on October 22, Liang Tao, vice chairman of the CBRC, revealed at the annual meeting of the 2020 Financial Street Forum that the number of P2P lenders actually operating in the country had been reduced to six by the end of September.
In response, Tian Yuan said, “I believe this number is somewhat accurate, so you can imagine how serious the P2P problem has become in China. Who actually profited from the $800 billion? It’s still a mystery. Because even if the platform is gone, the obligation of the borrowers to pay back the money has not stopped, and it is not known whether the people who have lent money to the platform have been left behind or not.”
According to Tian Yuan, the CCP is now forcing to clear the P2P, and there are actually reasons for doing so. The first point is that the Chinese Communist Party will never allow P2P to continue to exist because of the so-called social security and social stability issues; there is also a financial reason that P2P has grown into such a large platform that it has caused a serious impact on the state-owned banks of the Chinese Communist Party.
Tian Yuan said, “the Chinese Communist Party for the purpose of maintaining stability, to shut down this P2P completely, and finally you will not be allowed to engage in, to do so can be transformed, but for many of the P2P platform, the two possibilities of transformation required by the Chinese Communist Party can be said to be out of reach, simply close down directly.”
“If the existence of this private lending, especially in the form of P2P, triggers a financial crisis in the CCP, this is certainly something the CCP government would prefer not to see. If P2P becomes the last straw that breaks the camel’s back, it is simply a matter of wanting to get rid of it for the Chinese Communist Party.”
He said the Chinese Communist Party is a reactive government, unlike other Western governments, which do everything with forecasts and have a kind of forward-looking studies and reports that can predict how Internet business will develop and how big an industry it will grow into in 10 years.
“Then the Chinese Communist Party, it completely ignores this set, what is the first thing is to let it also crazy growth before. The most typical example is a kind of bicycle sharing, the second example is the eggshell apartment burst, the third example is P2P. when it first came out, everyone thought it was a good thing, but in the end it all ended up in the dust.”
The company’s main goal is to make sure that the company is able to provide the best possible service to its customers.
“This is the same reason why Google was forced out of China and why Facebook and Twitter could not enter China. The Chinese Communist Party has a system of government that is not suitable for the development of the modern economy, nor for the distribution of goods, people and market factors. He said.
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