Chinese police are investigating a troubled state-managed metal exchange for criminal offences, the local government said late Tuesday, months after it failed to pay investors.

Fanya Metals Exchange, which claims to be the world's largest minor metals exchange and managed around 40 billion yuan ($6.2 billion) in assets, has defaulted on payments to a reported 220,000 investors since April due to plunging commodity prices worldwide.

The exchange, in the southwestern city of Kunming, offered investors a bet on increased metal prices, promising some speculators double-digit returns on their investments.

Police have opened an investigation into the exchange on suspicion of "illegal business practices", a statement on the city's news portal said.

The announcement comes as Fanya chairman Shan Jiuliang has been missing since October 15, according to a stock exchange statement from Imagi International Holdings, another company Shan chairs.

Imagi said Shan had missed two board meetings.

Incensed Fanya investors seized Shan at a Shanghai hotel in August and handed him over to police, reports said. He was later released.

In October the payment crisis sparked protests in Beijing and Shanghai, with police detaining hundreds of people in the capital.

Yu Haichao, who was detained when she travelled to Beijing to participate in the protests, said she was unsure if she could get her money back even after Fanya was probed.

She invested more than 170,000 yuan from her child's education fund in the exchange.

Police forced her and other protesters to sign a pledge saying they would not attend any gathering related to the exchange, Yu said earlier, and the following day officials took her back to her home province, Shanxi.

"Police built a case for Fanya, but I don't know whether it is a good thing or a bad one for investors," Yu told AFP Wednesday. "I feel like the case is just a consolation to people and (a way) to maintain social stability."

The exchange's payment problems pre-date China's market rout earlier this year, which wiped out trillions of dollars of market capitalisation and prompted authorities to launch an extraordinary bail-out plan.