The collapse of China's P2P lending industry has left a significant mark on investor behavior, particularly among younger generations. Following a scandal that resulted in millions of investors suffering substantial losses, many are now adopting a more cautious approach to investing. The P2P lending sector, which began around 2007, promised high returns but was effectively shut down by authorities in 2020 due to widespread illegal activities. By 2022, P2P platforms owed over 800 billion yuan (US$112.8 billion) to investors, a figure that dropped to 490 billion yuan as the industry faced its reckoning [dd419a8d].
Stella Guo, one of the affected investors, lost 200,000 yuan (US$28,000) when the Tuandai platform collapsed, impacting 220,000 investors and totaling losses of 14.5 billion yuan (US$2 billion). This experience has instilled a sense of fear among young investors, with 66.7% of those aged 26-30 now adopting a conservative investment attitude. The economic slowdown in China has further discouraged risky investments, with only 14.9% of residents inclined to invest more in 2024 [dd419a8d].
In parallel, the recent bankruptcy of Sichuan Trust has compounded the financial woes of elderly retirees who had invested in the trust, reflecting broader challenges in China's economy. The trust's insolvency, announced in 2020, has left many investors facing significant losses, with a repayment plan that has been criticized for being coercive. The government's efforts to protect investors and control risks in the trust sector have not alleviated the fears of those affected, as the debt crisis continues to unfold [1027b4a9].
The Chinese government is caught in a dilemma, needing to assign losses from the trust collapse without further weakening consumer confidence. The trust sector, part of the shadow banking industry, has faced increased scrutiny, and the troubles at Sichuan Trust highlight the risks inherent in this area of finance. As the economy grapples with these challenges, the shift in investor sentiment—especially among the youth—signals a broader trend towards risk aversion in the face of economic uncertainty [1027b4a9] [dd419a8d].