Conglomerate That Bailed Out Its Online Lending Site Can’t Pay Workers

The crisis among China’s online peer-to-peer (P2P) lenders could be spreading.

Beijing-based conglomerate Forise Holdings Group, which has invested indirectly in a cash-strapped P2P lending platform, owes back pay to about 2,500 employees, Caixin has learned.

More than 50 employees of Forise and its subsidiaries gathered at Beijing’s social security bureau on Friday to request unpaid wages from several Forise units. Many of the employees had not been paid for six months, an employee told Caixin.

Nearly 2,500 employees have not been not properly paid, according to an inspector at the local social security office.

Forise, which has businesses in areas that include asset management, finance, property, environmental protection and retail, has seen its own money problems come to a head not long after one of its subsidiaries announced that it would help bail out the struggling P2P lending platform Haixiang Jinfu. Although still operating, Haixiang, in which Forise holds an indirect stake, was among the platforms caught up in the nationwide P2P crisis after it failed to repay its investors.

Beijing Foriseland Real Estate Development Co. Ltd., a Forise subsidiary, said in November that it would help Haixiang compensate investors (link in Chinese) with about 7.6 billion yuan ($1.1 billion) of its own assets. Haixiang has had trouble collecting payments from P2P borrowers and thus had problems repaying the investors who lent money over its platform, according to a post on its WeChat social media account.

The platform has promised to repay each investor at least 1,000 yuan by the end of this year. And starting next year, it will allow investors to resume redeeming their balances on the platform under an installment program, a customer representative told Caixin over phone.

But meanwhile, Forise and its subsidiaries have been dealing with their own liquidity problems. Foriseland hasn’t paid many workers their wages since July and skipped giving out bonuses in the second quarter of this year, several Forise employees told Caixin. In August, Foriseland laid off employees who were on probation and said that workers who were willing to resign could receive their wages immediately, Caixin has learned from multiple Foriseland employees.

In November, more than 1,000 Forise employees jointly filed an arbitration application to a local labor court in Beijing. The court ruled that Forise needed to pay what it owes to employees in two installments — one on Nov. 30 and one on Jan. 31. Forise, however, missed the first payment.

A director-level manager at Forise told Caixin that many employees were upset because the company has been reluctant to pay its employees even though it has assets available.

Forise Group did not answers phone calls from Caixin seeking comment.

China’s P2P industry has been undergoing a regulatory overhaul in recent years. Regulators across the country have worked to bring the loosely regulated industry to heel after a string of scandals and fraud. As of November, more than 5,200 P2P platforms nationwide have had difficulties meeting cash withdrawal demands, have seen their owners abscond with investor funds, or have been investigated by police, according to a report (link in Chinese) by Wangdaizhijia. In November, the number of P2P platforms still in business fell by 25 from the previous month to 1,181.

Contact reporter Timmy Shen (hongmingshen@caixin.com)