IN 1997 the collapse of several large Ponzi schemes in Albania precipitated mass disorder, the overthrow of the government and the deaths of 2,000 people. The failure, in another country lacking robust financial regulation, of a huge Ponzi scheme is not going to lead to the overthrow of its president, Xi Jinping. But it could cause the government political problems. And it shows that China is as vulnerable as anywhere else to the chaos that can result from financial shenanigans.
The company that failed was Ezubao, China’s largest peer-to-peer (P2P) lender (one of its now sealed-up offices is pictured). P2P websites connect borrowers and lenders without a bank’s intermediation. Founded in 2014 by Ding Ning, who, according to state media, had done well for himself manufacturing can-openers, Ezubao quickly became one of China’s best-known new financial firms. Mr Ding spent millions on an advertising blitz, ordered employees to sport luxury brands or glitzy jewellery and was interviewed on the government’s web portal about his company’s contribution to Chinese growth.
But it was dodgy from the start. One executive said that “95% of...Continue reading
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