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Chinese police have stepped up the crackdown on peer lenders by blocking 10,000 trillion rubles ($ 1.5 billion) in 380 companies and sending teams all over Asia to search fugitives.
The operation, called "Fox Hunt," according to the Ministry of Public Security, has arrested 62 people in 16 countries, including Cambodia and Thailand.
The so-called P2P loan – a $ 120 billion company linking private lenders to online borrowers – was once a thriving sector in China, with little government control over the thousands of businesses that quickly opened stores. Business leaders have often claimed that the market was a market that regulators had left largely intact to promote innovation.
But in recent years, a series of billion dollar scandals have resulted in much stricter oversight. Hundreds of companies were forced to close, while industry figures fled the country. Experts estimate that there will only be 50 P2P lenders remaining by the end of the year.
The latest Chinese police campaign accuses some P2P lenders of having "used the pretense of financial innovation with the lure of high return" to collect large sums of money.
An investigation revealed that executives of some companies had fled abroad while they could no longer repay investors, the ministry said. This resulted in the freezing of funds and an operation that sent Chinese police teams into the area to arrest such individuals.
The crackdown comes at a time when financial regulators are alert to the hidden risks of China's financial system.
Until now, regulators have turned to the "shadow banking system" in the form of wealth management products and trust funds – an important sector at 62 billion rubles at the end of September.
While the government is trying to slow the growth of the shadow banking sector, "regulatory supervision of home loans has also increased dramatically," according to a report by Fitch, the credit rating agency, released last week.
P2P has been particularly sensitive as it has resulted in heavy losses for the average Chinese people, which the government is afraid of causing social unrest.
In an incident that occurred in 2016, a company that had collected $ 7.6 billion of investors turned out to be "a complete ponzi scheme," according to the news agency Xinhua official.
In the past year, investors have taken to the streets to demand a refund, while many executives in the sector have been banned from the police to leave the country, according to several people close to the case.
The Ministry of Public Security noted that at least 100 people connected to the P2P industry had gone before the bankruptcy of their businesses.
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