Internet finance risks remain high among Chinese smartphone users
There are about 700 million smartphone users in China and many of them are sending money through apps for transactions, as well as investing through peer-to-peer financing platforms or directly in companies that raise money by crowdfunding. The Wall Street Journal reports (paywall) that around a million companies in China have raised money that way. Chinese households now hold about one-third of the $20 trillion in deposits in banks. However, as consumers have begun to view internet finance schemes as an easier and quicker way to earn money, many of them have shifted to investing in companies, resulting in roughly $200 billion of investment in 2015 and even more last year, according to consulting firm McKinsey & Co.
In January and February, at least 13,000 customers were affected when they couldn’t get repaid after buying $166 million worth of bonds from Chinese electronics maker Cosun Group through an online marketplace owned by Ant Financial Services, an affiliate of ecommerce giant Alibaba. In April last year, about 38,000 investors who had invested more than $2 billion in finance platforms owned by Shanghai Kuailu Investment Group demanded repayment from the company. The company’s owner has since disappeared and investors say they have not been repaid.
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