The easiest way to lose your life savings in China

Only recently has the government started to crack down on the mostly unregulated online platforms but overly trusting elderly investors are still at risk

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Investors look at screens showing stock market movements at a securities company in Beijing. Experts say China’s elderly can be particularly vulnerable to risky or even fraudulent investments, such as P2P online lending. Photo: AFP

Published: 9:00am, 27 Dec 2017Updated: 3:19pm, 29 Dec 2017

By any measure, 62-year-old Shan Juzhen was an easy mark. After the shortest of conversations with other investors, Shan put more than US$15,000 – or nearly a year of her pension – into a lending club she had never heard of.

She felt it unnecessary to check the qualifications of the lending club, which serves as an alternative for borrowers who cannot get a loan from a big bank. She also did not ask questions about how her money would be lent. The only thing Shan wanted to know was would the platform give her a high return on her investment.

“Yes, we will,” the staff assured her – sufficient for the retired technician in Hangzhou to transfer the money.

“I wanted to invest in that lending platform because they had offered me a higher interest rate than local banks, 6.3 per cent versus some 4 per cent,” Shan told This Week in Asia earlier this month. Besides that, “everybody I know has put money there, so I did the same”.

An elderly Chinese woman walks in a street in the Hutong neighbourhood, in Beijing, China. Financial analysts warn that older Chinese investors are often caught unaware when their investments, such as P2P online lenders, go bad. Photo: EPA

The lending platform never informed Shan about the financial risks associated with her investment or run a risk assessment on her. And Shan is hardly alone. In fact, she is among a growing number of Chinese senior citizens who in recent years, despite their limited financial know-how, have flocked into the peer-to-peer (P2P) lending, a sector that is often described by industry players as the “wild west” of investment.