And they are not the only ones. With a strong financial backup, the company was able to control half of the domestic router market. Not only that, Linlijia is unable to get in touch with its financial backer. Suppliers are trying to collect their debts, bills keep mounting and partners are suspending their cooperation. 0. shares. The company started having financial difficulties when iCaifu, its business partner and one of its main investors, was being investigated for misappropriation of funds. The P2P lending crisis started on April 4, when the Shanghai Police arrested Zhou Bayun, the legal representative of Shanlin Financial along with seven others. Cryptocurrencies? facebook twitter linkedin whatsapp. In April this year, the China government unleashed a tighter set of regulations for the country’s P2P lending firms to curb the growing number of financial scams in the sector. As a result, the company’s sale channels had been blocked and the whole company was facing a major crisis. But the bigger anxiety is that the crisis now threatens to spread send shockwaves beyond these platforms’ immediate circle of investors and threaten to jeopardize businesses in different sectors. facebook twitter linkedin whatsapp. P2P Collapse in China To Be Felt Across Different Industries Aug 3, 2018 by A. Alfaro . If that also explodes, how far will it spread? The company has told workers that due to “hardships faced by the company’s investors”, Shangpin International has terminated its labor contracts with them. Although these three examples of companies facing financial difficulties look unrelated, they have a common element: P2P lending. In recent months, authorities have ramped up regulatory oversight of the world’s largest P2P lending industry. © 2018 The Passage | All Rights Reserved. According to the report by the Travel Business Observatory, the agency is behind on the payment of the last three months’ salaries (USD 727,000). Its employees at the 168 stores who were working as usual only a few days ago, now face an uncertain future. On June 26, iCaifu made a public statement in which the company declared it would stop its investments. At the beginning of 2017, Lufax started pivoting away from P2P lending to focus instead on Chinas booming retail investment market. It will affect venture capital the most.”. He can be reached at varofaro@gmail.com. A. Alfaro is a Beijing-based freelance reporter. As a result, all his bank accounts had been frozen. Some of its senior executives actually left 7-11 to found Linlijia. The previously mentioned report by the Travel Business Observatory described how a Mister Ma, the assistant vice president of the human resources department of Shangpin International, confessed to an employee earlier this year that Chunxiao Capital’s funding was not guaranteed anymore. But everything changed overnight. Now everybody is afraid: who will be next? Linlijia has basically declared bankruptcy. Collapse of China’s disgraced P2P sector offers important lessons Online platforms forced banks to improve offerings but model wasn’t sustainable. Photo:Shutterstock.com . Shangpin International’s difficult situation is also rooted in a loser of the P2P battlefield. Other P2P platforms that received investment from Chunxiao Capital such as Niubanjin, Jucaimao and others have either defaulted payments or been investigated by the police. It can only be fixed by the market, the government will not be able to rescue everyone. The executive explained how two of the seven Chunxiao Capital’s P2P projects had already collapsed and the Shangpin International was doomed. Linlijia was regarded as the Chinese convenience store that was most similar to 7-11. China’s peer-to-peer (P2P) lending industry is in turmoil. Its suppliers have Linlijia’s suppliers have already prepared a lawsuit against the convenience store chain. The collapse of peer-to-peer lenders in China has prompted public protests. According to Wang Chuyun, the shareholders are unable provide funds to solve these problems. At that time, it was reported by local media that Xiang Jianan, the person supervising Linlijia’s operation, had also very close links to Zhou Bayun.