In China, financial discipline, like any other, is at the highest level. The authorities closely watch cash flows in the country, and in case of any suspicious activity, they act quickly and decisively. The Chinese police froze assets of more than 380 peer-to-peer (P2P) lending platforms. The total amount of sealed up assets is estimated at a record 10 billion yuan or 1.5 billion dollars. The Chinese government is strongly opposed to this type of bonded lending and openly struggles against such microfinance organizations. As part of a large-scale operation code-named “Fox Hunting,” which covers 16 countries and regions, including Thailand and Cambodia, similar events are held regularly. According to the Ministry of Public Security, 62 people who were suspected of operating fraudulent P2P platforms have been arrested since June last year. On the one hand, this is a good approach, on the other hand, they should not have let this market develop at all. Now, this sector is under special observation within Beijing’s struggle against financial risks. Due to the popularity of this type of lending, China has become the happy owner of the country's largest financial pyramid, the collapse of which turned into protests in major cities and losses for thousands of depositors. The number of Chinese peer-to-peer lenders may drop by 70 percent this year to 300, according to an estimate from Shanghai-based Yingcan Group. Citigroup Inc. predicts that only some 50 firms will survive eventually.
FX.co ★ China struggles against financial pyramids
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