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Dianrong offers 10% guaranteed investment return in Sina partnership

New product: 10% guaranteed return!

Update: Unbelievable, the product below was so popular that it sold out in just 2 minutes! Only in China, finding lenders for 3 million RMB (about US$ 500K) in 2 minutes. I love it!

Last week Grace and I visited the offices of (formerly SinoLending) in Shanghai, a p2p lending company where I’m a board member. They have some innovative products coming up and one of them will launch today.

In a cooperation with Sina, Dianrong will now offer lenders a 10% guaranteed annualized return on their investments in a new product that they offer. Anybody can join, the minimum amount that you need to lend out is RMB 500 for a period of 6 months. However, the offer is only available until Monday or until 3 million RMB has been lended (whatever comes first). You can check the progress here:

I think this will be a very popular product, because the principal and interest are guaranteed and because it’s offered in cooperation with leading portal Sina. The product will introduce more people to the concept of p2p lending in China, where the savings rate is traditionally quite high and banks like anywhere give low interest rates on deposits.

Dianrong is growing extremely fast and I am proud of the strong team that comes up with these new products and implements them quickly. Expect some more innovative products over the next couple of weeks.

Sold out in 2 minutes!

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  1. Hi Marc,

    this is an interesting development for China. But how are they able to offer a 10% guaranteed annualised return? This seems to be a very high promise. Unfortunately I cannot read the Chinese website, but does the lender know, what is money is used for/invested in?


  2. The money is invested in many different loans, because of this diversification Dianrong knows in advance how many will default and they can calculate the return. By the way, 10% is not very high in p2p lending in China, see an overview of current loans & interest rates here:

  3. NEVER trust investment tips from Blogs. And 10% guaranteed is nonsense. As for “Dianrong knows in advance how many will default” then that is both insider dealing and not exactly a “guarantee”. STEER CLEAR WITH A BARGEPOLE.

  4. LOL, you really have no clue about how P2P finance works. Maybe do some research before commenting again under a screen name that suggests you know something about investing!

  5. I think Tobias and HongKongSecuritiesGuy are right. It seems too much to guarantee. How much are you and Grace investing in it or are you a salesman for this scheme?

  6. Maybe a quick explanation about p2p lending is needed, because some people don’t know the concept. I have been investing in LendingClub and (later) Dianrong for years, it’s not a ‘scheme’ but a way to earn the same returns that banks normally earn. And by diversifying you know in advance your approximate returns, or the company can guarantee you a bit lower return than what is expected (which is the case here).

    I normally invest a small amount (say $50) in thousands of loans. These loans have interest rates between 10-15% on average. When you invest in so many loans you know the approximate number of loans that will default, so you can calculate your expected return. At LendingClub I earn about 8-10% per year depending ont he risk that I want to take (returns are very stable over the years), in China the interest rates are generally higher so you can also earn higher interest income. Therefore a guarantee of a 10% return is possible.

    The ‘trick’ is to diversify among enough loans so you know the default rate in advance. Next to that you get the interest rate that the banks normally get. How do you think banks earn their mega profits and pay their huge salaries? P2P technology gives borrowers lower interest rates and lenders higher returns by taking over the role of the bank.

    You don’t have to believe me, but P2P loans are a well known asset class with high returns, not a get-rich-quick scheme. I would not risk my reputation by writing about something sketchy. See also this post about the same subject from about 2 years ago:

  7. Mirrisa/Tobias/HKSG, in the US offers loans around 8-10% and that is a mature market. A standard transaction can be a housewife in Texas who wants to refinance a 18-20% credit card loan with 10% loan provided for by P2P lending.

    The Chinese version of P2P lending is similar but not entirely the same. The discrepancy exists because non-State Owned Companies, particularly SME’s are unable to obtain financing from the major banks (yes, you guessed it, they are all largely state-owned and/or state influenced). So if I am a manufacturing company in China and I need capital to either expand/grow or just to finance working capital, there are very limited ways for them to obtain this funding. This issue is why there is such a HUGE shadow banking market in China. SMEs are being forced to pay 4% interest per month (that’s over 50% annualized!) from loan sharks and other short term capital providers so it makes sense for the SME to borrow at 15-20% and still be better off. There is a huge demand in the market for someone to come in, screen the loans as a bank would do, put a stamp of approval and credit rating on it, and market it to the general public. The savings rate is extremely high in China and this is a great way to marry the users of capital with the providers of capital in a far more efficient way. The risk is that, in an undeveloped credit monitoring market, people will ill intentions borrow from p2p sites and never repay (google Tank China p2p lender) so until the data verification process becomes more streamlined like in developed markets, the China model will be to source high quality loans from physical regional branches but syndicate it out into an online marketplace. Judging by the rush of people on the sina-dianrong promotion, the shortage is not the capital but it’s in the loans that deserve the capital.

  8. First of all, nobody knows the default rate in advance. Not S&P, not Moody’s, not Fitch. Even debt rating agencies, with their research capabilities and gigantic databases, get it wrong some times. So to claim that one would know the default rate is plain dishonesty. Second of all, the “trick” of diversification is the same “trick” the entire Wall Street bought into before the subprime crisis. Who would have thought that so many homeowners would default at the same time? My warning to all you guys: don’t get caught picking up pennies on the rail track.

  9. What happened in the subprime crisis is very different from marketplace lending, where you spread your risk among 100s or 1000s of loans with many different kinds of risk (not only subprime like in 2008!). Anyway, if you don’t understand it or believe in it and still find it risky, that’s fine of course. Good luck finding investments with a better risk/return profile.