Just a few big Chinese P2P lenders seen surviving in sector tarnished by scandal
Having once enjoyed breakneck growth, China’s P2P lending sector was later rocked by a series of fraud scandals that prompted a government clean-up
The seemingly relentless proliferation of China’s peer-to-peer (P2P) lending platforms has finally been contained by stringent measures introduced by the government in a bid to tackle a fraud epidemic that tarnished the industry’s reputation.
The sector, which ballooned to host thousands of firms of varying sizes and specialities, will eventually become limited to just a handful of mega participants, according to Zhang Shishi, a co-founder of the Chinese P2P platform Renrendai.
“The industry is already healthier,” Zhang said on the sidelines of the Boao Forum for Asia in Hainan province. “The reshuffle among Chinese P2P firms will last for a while, but the market will become highly concentrated – an oligopoly of just a few players – where only companies of large scale will eventually stay.”
P2P lending platforms act as online intermediaries that assist individuals or small businesses in borrowing money from online investors. The internet-based financing method was once seen as a saviour to those – particularly small and medium-sized enterprises (SMEs) – that were unable to obtain loans from traditional financial institutions such as banks.
However, the heated competition that emerged as a wave of profit-hungry new players crowded in, all hunting aggressively for investors and money in the markets, led to a rise in illegal activity. Countless cases of P2P lenders promising high returns from non-existent projects and then running off with the proceeds made the headlines.
