HERA the Stars
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- Mar 14, 2018
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https://www.pymnts.com/news/international/2018/financial-crime-china-beijing-protest-p2p-lending-losses/China has ordered a lockdown of Beijing’s financial district Monday (August 6) to prevent individuals from protesting a crisis in the peer-to-peer (P2P) lending marketplace.
According to a report in the Financial Times, hundreds of police officers and security guards gathered near the offices of banking and securities regulators, as well as the entrance to the underground train stop for the financial district. Police were checking identity cards of anyone entering the area to prevent organized demonstrations by groups of investors that lost money as P2P lenders went under.
In June P2P's (peer to peer online lending companies) lost $200 billion and in July another 200 P2P's ran into trouble. Clearly investors are extremely upset, many assumed Beijing would bail out these firms as it has always done in the past.
After the 2007/8 financial crises China used debt to fuel it's economy, loans were used to repay loans and collateral used as security for multiple loans. If you ran out of money and couldn't repay your debt you took out another loan.
China's local governments have forcefully expropriated property from approximately 63 million villagers, onsold the property to developers who then took out enormous amounts on loans to build infrastructure that stands largely empty today. The belief that China's economy is built on exports is a myth, companies like Huawai are largely dependent on government subsidies to make them profitable, these subsidies also give them an unfair advantage against companies from other countries, where these companies are forced to shutdown because they cannot compete against China's heavily subsidised industries.
The question today is how far Beijing will let this go before it intervenes once again, simply for the sake to keep China's social fabric from tearing apart.
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