Did P2P lending cause a Chinese bubble, and is it bursting?
Another high-profile P2P lending scam should give pause to Chinese domain investors.
Remember those videos of the Chinese super bus making the rounds on social media a few months ago? The bus was designed to travel above car traffic on the street below.
Well, it turns out it might have been just one big peer-to-peer (P2P) lending scam.
According to a Bloomberg article published this week, the promoters of the bus borrowed money on a P2P lending platform and promised a 12% return to investors. The article goes on to explain the rise of P2P lending in China, much of which has essentially been a ponzi scheme.
I have concerns about the Chinese market for domain names also being underpinned by P2P lending.
Not everyone thinks it’s a house of cards, and it sounds like some platforms are lending money in a smart way. Simon Cousins and Raymond Li of Allegravita discussed P2P lending and its role in the Chinese domain name market on DNW Podcast #95.
4.cn’s lending platform has doled out about $30 million in loans, Li said. But it only lends a small amount of the value of the domain name so that it can protect itself. If the platform lends 50% of the value of a liquid domain, it’s still safe if values are cut in half. It also lends money short term, such as 3-6 months, which reduces its risk.
Still, it’s fair to be concerned when someone says people can start investing in domain names and earn 20% guaranteed. Someone will get stuck holding the bag.
We saw this on a somewhat smaller scale in the U.S. last decade as the economy and PPC collapsed. A lot of domainers borrowed money to buy domain names and ended up deeply in debt.
The Beijing company that is building a “Great Wall of Domain Names” in China.
Domain investing in China has its followship of legitimate, serious investors. They invest, more or less, in the same genres Westerners do: geodomains, generic words, short domains in quality TLDs, plus Pinyin.
The gaming of entire secondary ccTLDs and gTLDs with mass registrations of long numeric sequences, is where one should look deeper. The process serves as a vessel for funds, essentially enabling the exporting of funds out of China; the latter is very much controlled by the government.
10 years from now, after the dust settles, some historian / economist will be writing their PhD dissertation on this period of massive Chinese domain speculation. I mean that quite seriously.
Untangling all the factors will require a lot of research. Not just specialized knowledge of Chinese, finance, and the domain industry … but also a lot of corporate records, archived blog / forum posts, sales data, and tons of historical whois. It’s a fascinating question: What drove this? Probably 20 different causes acting in concert.
But I also wonder: What if they don’t begin the research until 50 years from now? How on earth could someone alive in 2066 understand the domain industry in 2015? Most of the data will have vanished.
Maybe you should write the book on the Chinese bubble popping in 2017. Why wait 50 years?
I don’t have the right skill set. Half the primary sources are written in Chinese. And I think the topic would need the eye of a forensic accountant.
Not exactly a best seller. This sort of dissertation skips over the public and goes straight into university libraries. It’ll be read, at best, 5 times per century. And that only for the sake of a footnote in some other PhD candidate’s dissertation! Nevertheless, it’s a worthwhile topic to tackle for someone with grant money in hand, if he’s seeking a career in academia.
Should have stuck with 3 letter .coms.