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English>>China Business

Risky Business

By Miranda Shek (Global Times)

09:05, July 31, 2012

Yu Zhijun, a 34-year-old full-time marketing executive in Hefei, Anhui Province, spends at least two hours a week managing his account with ppdai.com, China's largest peer-to-peer online lending platform. He earns what he calls "the most miraculous returns" - or 18.2 percent on an annualized basis in the last three months.

"I know the risk of lending online, but the returns are amazing," he told the Global Times. "I made over 40,000 yuan ($6,268.80) last year and that's half my annual salary as a marketing executive in an international firm."

As an amateur online loan manager, Yu manages his risks based on the credit records of the borrowers and he seldom asks about the purpose of the borrowed sums.

"I do not need to know what the money is for. People often say they need the money to pay emergency medical bills," he said. "All I need to do is make sure that I do not give money to people who will leave without paying it back."

Private lending is common in the Chinese mainland as a tradition among families and friends, but this unregulated "shadow banking" system moved online in 2007, creating a broader national platform. ANZ bank told the Financial Times in a 2011 report that the country has an estimated $2.4 trillion circulating in the shadow-banking sector.

China now has over 2,000 websites offering private lending activities. Loans brokered online saw an astonishing 300-fold increase to 6 billion yuan in the first half of 2011 from the full-year total of 2007, China National Radio reported in June.

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