Hundreds of investors gathered outside the headquarters of China's securities watchdog on to protest against a metals exchange in a southwest province they accuse of defrauding them of billions of yuan.

Carrying banners emblazoned with the words "ignoring Fanya fraud", the protestors were eventually dispersed by police from the main gates of the China Securities Regulatory Commission (CSRC) in Beijing's financial district after more than two hours.

"We were protesting today because we have no other option and no one has responded to our complaints," an investor surnamed Fang told Reuters outside the CSRC's headquarters.

The Fanya Metal Exchange, located in the city of Kunming in Yunnan province and authorised by the local government, trades 14 minor and rare metals, including indium, bismuth, tungsten, antimony and cobalt.

It attracted billions of yuan from investors who bet on higher prices, building up huge stocks of metals in its authorised warehouses. That also helped support prices in the exchange and helped provide financing to some firms.

As many as 220,000 investors nationwide were enticed by rising prices to buy metals on the exchange, but demand for the metals has been falling this year as a result of the slowing economy, and Fanya's warehouses are now bulging with stock. The collapse in equity markets also prompted some investors to try to cash in their bets on Fanya in July.

"Their propaganda never mentioned anything about risks," said Fang. She added that in some regions, local banks had encouraged clients to invest in products linked to Fanya's metals. She said as much as 45 billion yuan ($7 billion) had been invested in the exchange and had not been repaid.

In an "open letter" to Premier Li Keqiang handed to Reuters outside the CSRC building, another protester said he had invested as much as 392,000 yuan on the exchange and now had no way of retrieving it.

Fanya said in a statement in July that it was experiencing liquidity problems after large numbers of investors tried to withdraw their cash at the same time, with a spokeswoman noting that investors were wanting to switch their cash into the equities markets.

An employee at Fanya's corporate clients department who declined to be identified told Reuters that there was a "run" on the company, but she declined to acknowledge that they had any problems with cash flow. She said the exchange was still running smoothly.

Last month, investors apprehended Fanya chairman Shan Jiuliang at a hotel in Shanghai and handed him over to police, according to media reports. He was subsequently released.

Shan and his wife Zhang Peng, also a vice president and director of Fanya, bought 20.95 percent of the Hong Kong-listed film production company, Imagi International Holdings Limited, for 543 million Hong Kong dollars in September 2014.

Shan is now chairman and executive director and Zhang executive director of Imagi. A spokeswoman at Imagi said operations at the company were normal, as were communications with the chairman.