The case was filed in the name of illegal fund raising, which means that people whose investments were damaged lost their money.
On December 24, the Chinese Communist Party (CCP) officially released the news that CCP Premier Li Keqiang held an executive meeting of the State Council and passed the Regulations on Prevention and Disposal of Illegal Fund Raising (Draft). Previously P2P lenders were mostly filed by the police in the name of illegal fund raising, which meant that people whose investments were damaged lost their money.
According to a press release issued by the Communist Party of China government website on December 24, Li Keqiang presided over an executive meeting of the State Council and adopted the Regulations on Prevention and Disposal of Illegal Fund Raising (Draft).
“The introduction of this regulation is very necessary. This is based on the summary of practical experience, the prevention and disposal of illegal fund-raising further into the rule of law.” Li Keqiang said, “to use the rule of law approach to dispose of illegal fund-raising, strengthen the supervision of key areas, prevent and resolve risks, and protect the legitimate rights and interests of the masses.”
Li Keqiang said that although all regions and departments to crack down on illegal fund-raising cases, but the situation is still relatively grim.
He stressed that “the illegal fund-raising behavior, must always keep a sharp eye on, must always be unremitting, resolutely and severely crack down in accordance with the law.”
The draft also provides for local governments at all levels, financial institutions and others to strengthen The prevention of illegal fund-raising publicity and education, to enhance the public’s awareness of illegal fund-raising prevention and identification ability.
Officials from the China Banking and Insurance Regulatory Commission recently said that the original 5,000 P2P lenders have been completely zeroed out. Previously, Beijing authorities called for the development of Internet finance, but then P2P lenders continued to explode risks, resulting in millions of financial refugees.
On Nov. 28, Liu Fushou, chief lawyer of the China Banking and Insurance Regulatory Commission, said that by the end of the third quarter of this year, the assets of China’s banking financial institutions in local and foreign currencies had reached 315.2 trillion yuan, up 10.5% year-on-year, according to the official media China Economic Network. Substantial progress has been made in the battle to prevent and resolve major risks, the blind expansion of financial assets has been fundamentally reversed, and the risk of shadow banking continues to converge.
Liu Fushou said, “Internet financial risks have been significantly suppressed, with the actual number of P2P lenders operating nationwide gradually reduced from about 5,000 at the peak to completely zero by mid-November this year”.
This statement means that China’s P2P network lending institutions fully retired, P2P era officially ended.
The official said that disputes between lenders and online lending institutions, lenders and borrowers, and borrowers and online lending institutions can be resolved through legal means such as self-settlement, applying for arbitration, and filing lawsuits.
The independent think tank Tianjun Political Economy pointed out in “The Inside Story of China’s Total Closure of P2P Online Lending” that P2P online lending is reduced to a ponzi scheme with a turning pool of capital, all the principal of the back investors pay the interest of the front investors, once the total closure means that many more investors will lose their money.
The reason for this is that in the past two years, P2P lending institutions have burst very many incidents, some police have been filed, the case mainly involves the “Criminal Law” two crimes.
Article 176 [the crime of illegal absorption of public deposits] illegal absorption of public deposits or disguised absorption of public deposits, disrupting the financial order.
Article 192 [the crime of fund-raising fraud] for the purpose of illegal possession, the use of fraudulent methods of illegal fund-raising.
And it is officially stipulated that in the process of police investigation and court acceptance of illegal public deposit absorption and fund raising fraud cases, the local government is only responsible for organizing and coordinating the work, and cannot take financial allocations to make up for the losses caused by illegal fund raising. The interests of the participants are not protected by the law, and if the participants (P2P lenders) are still unable to clear the money collected by the courts, they should bear the losses themselves, and cannot ask the relevant departments to pay for them on their behalf.
This means that as long as the P2P network lending case is filed for the two above-mentioned crimes, then it is basically difficult for investors to get back their principal.
P2P network lending (peer to peer lending), also known as social lending, refers to direct lending between individuals and individuals realized through Internet institutions. Individuals include natural persons, legal persons and other organizations. The rapid growth of online lending as a new type of lending institution has put pressure on traditional lending and forced it to transform. Because peer-to-peer lending companies offering these services typically operate using the Internet, they can operate with lower overhead costs.
Looking back at the development of China’s P2P lending industry, it has gone from nascent to wild growth to full-scale liquidation in just a few years. Financial innovation was proposed by Beijing authorities, followed by the emergence of various types of Internet financial businesses. Behind the barbaric growth of P2P lenders was a lack of regulation, resulting in millions of financial refugees. Excessive financial innovation and the lack of financial regulation are important reasons for the crisis.
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