Chongqing's Largest P2P Platform Hit Again After Another State-Owned Credit Guarantee Firm Defaults

Chongqing Yijiu, operator of the largest P2P lending platform in Chongqing, has defaulted on a 250 million yuan product. The product was a bundle of 57 loans guaranteed by Guizhou Energy Credit Guarantee. Of these, 57 loans are overdue since February 18, a total of 254 million yuan. It's estimated 2588 investors invested in the loans. A subset of the GECG guaranteed loans went mostly to small firms engaged in trading, decorations and technology. The average loan is 3 million to 6 million yuan. In total, GECG guaranteed 1.09 billion across 196 loan bundles.

GECG traveled to Chongqing to meet with Yijiu and investors to discuss the payment of interest, followed by repayment of principal three months later. Yijiu's P2P platform sold the loans on its platform, but it served as the intermediary between GECG and investors, and did not publicly reveal the default until this past week. It was the second default after the firm failed to make good on a prior promise of payment.

One investor said that regardless of the outcome, investors have lost confidence in GECG. The firm's loans are also sold on a Shenzhen P2P platform. There, 23 products worth 78 million were sold, with 10 million yuan repaid and 68 million yuan outstanding.

Netease: 贵州国资担保公司爆雷:重庆最大P2P亿元项目违约
Sina: 网传贵州国有担保公司P2P项目违约 涉案金额超2.5亿

This isn't the first state-owned credit guarantee bust that has hit Yijiu. The firm also sold products from Hebei Financing Investment Guarantee (HFIG), which went bust last year.

Related: Guangzhou has banned credit guarantee firms from the P2P industry.
To: All financing guarantee companies:

In the wake of frequent incidents related to P2P platform risk around the country recently, various provinces and municipalities have stepped up efforts in rectifying P2P online lending platforms with many ordering a halt to new P2P platform registration. The P2P platforms are said to be generally involved in irregularities including high yield, fictitious items, false publicity and the creation of capital pools. The following measures are to guard against the risk that may arise from involvement of financing guarantee companies in the P2P lending platforms and ensure the sustainable development of Guangzhou’s financing guarantee industry before promulgation of regulations on P2P platforms at the national level:

(1) Financing guarantee companies in Guangzhou are prohibited from providing financing guarantee and prejudgment attachment on the P2P platforms;
(2) Financing guarantee companies in Guangzhou and their shareholders or related parties are prohibited from holding a controlling stake or holding shares in a P2P platform;
(3) P2P platforms are prohibited from acting as contributing shareholders of financing guarantee companies in Guangzhou.

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