Singapore’s sovereign wealth fund invests in risky peer-to-peer lending platform from China

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Singapore’s sovereign wealth fund, GIC Pte Ltd has reportedly invested a whopping $220 million along with other investors in Dianrong – a peer-to-peer lending platform from China. The firm is to use GIC’s funds to automate some of it’s branches for research, development and acquisitions, according to Reuters.

Peer-to-peer or P2P investing is a platform where borrowers are matched with investors online. The $120 billion P2P industry is fraught with risk and controversy and is well-known for being one “full of bad loans and no profits.”

China’s pending regulatory crackdown on the $120bn peer-to-peer lending industry has claimed its first scalp before it has even begun, with one of the biggest players saying it will wind up its business in an industry full of bad loans and no profits.

In recent years, China has begun cracking down on such P2P firms through introducing new regulations that aim to wind down the scandalous industry. The country is home to about 2,100 such firms. Besides Dianrong, its founder also own another such online lending company, which raked in US$207 million in 2015.

The risk in the P2P industry is extremely high. Since 2011, about 3,795 P2P platforms have been estimated to have collapsed. The police in China have arrested over 20 P2P investors for running Chinese police last year for running “a complete Ponzi scheme” under the guise of an investment strategy and milking investors to the tune of US$7.6 billion.

Chief investment industry players like Guo Guangchang, Fosun Group’s chairman, have disparaged the P2P market as “basically a scam.” Likewise, Ping An Insurance president openly stated that most P2P lenders were “fakes.”

Singapore Prime Minister Lee Hsien Loong is the chairman of GIC, which is formerly known as the Government of Singapore Investment Corporation. The firm was set up 36 years ago, in 1991, to preserve and enhance the nation’s foreign reserves.

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14 comments

  1. It’s not their hard earn money. Just increase water tax and invent new kind of tax to make citizens pay for their mistake. Vote for your own extinction people. Slog till die, they live in million dollar lifestyle. ‍♂️

  2. When the Chinese government tried to tighten the lending from the state-owned banks, especially the poorly regulated regional banks, which have been giving China a serious debt problem, the P2P platforms are alternative funding solutions trying to step in to fill this void. Whether it is from the regional banks or from P2P, too much imprudent lending gives rise to the same problem of bad debts and bankruptcy.

    Even Wang Jianlin, one of China’s richest men, of the Dalian Wanda group has to sell off USD 9.4b assets in overseas hotel properties in order to pay for loans taken from state-owned banks. Similarly, HNA, Anbang Insurance and Fosun International might have to scale down their overseas operations in order to comply with the new regulations, likely losing money to opportunistic buyers, hoping to land a cheap buy. Rightfully speaking, our sovereign fund should go for such assets under a forced sale, selectively, but the thing to note is that the world economy is likely to go into a deep recession or even a depression soon. Maybe a defensive investment strategy might be an even more prudent approach.

    Without fully understanding where the need for such funding is, every new investment vehicle appears good. Is this how our sovereign fund conducts its business?

    1. Lim Kopi says:

      Thank you thank you thank you! It’s been such a long time since i last seen criticisms that aren’t shitposts. It’s informative too!

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