SHANGHAI (REUTERS) - Beijing has called on local authorities to crack down on illegal fundraising platforms after China's largest online peer-to-peer (P2P) lender was found to have collected more than 50 billion yuan (S$10.65 billion) for fake investment projects.
The State Council said on its website late on Thursday (Feb 4)that strict precautions must be taken to prevent future illegal fundraising cases, and that the government would work to educate the public better about such financial risks.
Detained executives from the parent company of Ezubao, once China's biggest P2P lending platform, have said the firm was a Ponzi scheme that advertised products promising annual returns of up to 14 per cent, attracting 50 billion yuan from more than 900,000 investors.
The case has underscored the risks created by China's fast-growing US$2.6 trillion wealth management product industry. Many products are sold through loosely regulated channels, including online financial investment platforms and privately run exchanges.
More than 400 billion yuan had been raised by more than 3,600 P2P platforms by the end of November, according to the China Banking Regulatory Commission. More than 1,000 of those firms were problematic, it said.