Last week, the prominent online investment portal Qianbao headlines the news when it devastated small investors and prompted Beijing to take steps. Online investing in China isn’t for the weak but unfortunately, that’s who it usually draws.
The pitches frequently entice aspiring small investors like Walter Xu. Xu is a recent university graduate who was drawn to Qianbao by promises of sky-high returns. Qianbao looked like a real business as the portal sold cell phones and appliances — with discounts for members — as well as big returns for those who gave it money. In exchange for depositing money, watching ads and writing reviews, it offered returns of over 50 percent. Mr. Xu invested a total of $32,000 of his savings in Qianbao, The New York Times reported.
Qianbao’s founder turned himself over to authorities last December 26. Mr. Xu turned to fellow investors on WeChat to commiserate. “I talked until 3 in the morning, I was shocked,” he said. Now, he said, he must put the episode behind him. “I need to work and start over,” he said.
Meanwhile, some investors who lost their savings in Qianbao protested last week in the city of Nanjing, where the online investment platform was based. China has been flooded with investment frauds in the past decades since its economic reopening led to a boom. In the end, online hocus pocus have the opportunity to reach more people in a country with more than 700 million internet users. Many of them are usually doing transactions on Smartphone.
“If you are earning 10 or 11 percent on an investment product, you should know that you are taking on a high amount of risk,” said Michael Pettis, professor of finance at the Guanghua School of Management at Peking University and a senior associate of the Carnegie Endowment for International Peace.