The Main Point
China has seen a proliferation of gray market, unregulated commodities exchanges. One has defaulted on financial instruments it sold, setting off protests from angry investors. Could be the “tip of the iceberg.”
Protests against losses
Protesters gather outside the office of the country’s top securities authority to complain they were cheated by the Fanya Metals Exchange in Yunnan province. The angry investors demanded the central government investigate Fanya for defaulting on 36 billion yuan it owed investors. The exchange had promised double-digit returns on a punt on metal prices increasing, a bet that went horribly wrong as commodity prices collapsed worldwide.
More than 400 exchanges in China
There are at least 400 such exchange platforms in China, managing roughly one trillion yuan of assets,” said Wang Hongying, head of the China Financial Derivatives Investment Research Institute. “Local governments have been very supportive of these exchanges as their turnover adds to the local GDP data.” The exchanges operate in a gray area in which no central regulatory agency has taken responsibility.
More losses for Chinese investors
The entire industry represents a potential wave of financial losses that, while smaller than the stock market or real estate market, could have a significant impact on individual investors in China.
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Fanya Exchange’s 36 billion yuan default ‘tip of iceberg’ in China