Chinese P2P platform fails to pay back $15m

Small online lenders struggle to secure cash flow due to market sentiment

A Hangzhou-based peer-topeer (P2P) lending platform has failed to pay around 100 million yuan ($15 million) back to its investors, media reports said on Thursday.

An investor surnamed Zheng who is based in Hangzhou, East China’s Zhejiang Province, told the Global Times on Thursday that he had invested about 50,000 yuan on niubangold.com, but now he cannot withdraw money from the platform. “[Investors] have reported the case to local police,” Zheng said.

According to a statement posted on niubangold.com late Tuesday, projects worth 98.5 million yuan are overdue.

The P2P lender provides financial products promising 7 to 9 percent in annual returns. Total transaction value on the platform is 39.1 billion yuan, with 825,200 registered users.

Wang Xuhang, founder and CEO of niubangold.com, told investors at a meeting on Wednesday that the platform would pay what investors bought on Tuesday to them via its original payment path on Wednesday, said news site www.21jingji.com.

The lender had intended to make its first repayment of 10 million yuan before Friday and will continue to make repayments of more than 10 million yuan each week over the next two years, the report said, citing the online lender.

But this is not an isolated case. An increasing number of P2P platforms have been collapsing since the start of this year. From January to June, problems were found brewing in a total of 323 online lenders, and 63 P2P lenders were found to be problematic in June alone, news site www.21jingji.com reported, citing industry data.

Du Hao, an industry analyst, attributed the recent increase in pending repayments of online lenders to market sentiment.

“Market liquidity is tight given the country’s efforts to deleverage, which have made investors nervous and panicked,” he said, adding that therefore, small online P2P platforms have been finding it hard to maintain their cash flows as investors hurried to withdraw money after being affected by market sentiment, calling such situation an “industrial vicious circle.”

Du said that in a bid to regulate the industry, authorities are expected to officially put forward a record-filing system in the sector to endorse qualified online P2P platforms.