Chinese borrowers drown in online lending's 'bottomless pit'

SHANGHAI - Telecoms engineer Peng Jiezhao's taste for new smartphones and expensive sneakers seemed like a harmless, if expensive, hobby - until he started borrowing money from Chinese online lending sites to feed it.

The government had previously encouraged internet-based P2P financing as a way to make the best use of personal savings to support China's slowing economy. Alleging lax supervision, thousands of people who lost money in P2P lending protested in Beijing's financial district last year, prompting a huge police presence to thwart the demonstration.

Zhang Yi, chief analyst with data mining company iiMedia Research, said authorities lost control of the rapidly growing sector. Zhang estimates less than 20 per cent of platforms will successfully transform, with the remainder facing shutdown.

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