Beijing police have thwarted attempts by the victims of capsized peer-to-peer (P2P) lending platforms to stage a protest at the offices of the China Banking and Insurance Regulatory Commission.
Reuters reports that police blocked the attempted protest on Monday in Beijing, which was directed at a nationwide crisis in China’s P2P sector, as opposed to just a single product or company.
According to the report the protestors are demanding compensation from the Chinese government for losses incurred by the collapse of P2P lenders.
Chinese regulators have launched a heavy-handed crackdown on the P2P lending sector which has resulted in an acceleration in platform closures since the start of the second half, as well as a exodus of talent to other fintech sectors.
Data from Wangdai Zhijia (网贷之家) indicates that as of the end of June China had seen the establishment of 6183 P2P lending platforms, of which 4347 have either suspended operation or succumbed to problems, leaving only 1836 in regular operation.
Compared to November 2015, the peak period for P2P lending in China when the number of active platforms reached 3476, the number of platforms in regular operation has fallen by almost a half.
According to Reuters officials are at least partially culpable for rampant problems in the Chinese P2P sector, given that in many cases lending platforms enjoyed either tacit or explicit support from local governments that resulted in moral hazard.
Fraudulent platforms have also been wont to claim support from the government in order to better entice investors.
Reformers are intent upon cleaning up moral hazard in the financial system by allowing defaults and insolvencies to take place, with Beijing repeatedly signalling that it will not be responsible for backing up any “illegal guarantees.”