During the first six months of 2016, at least 264 peer to peer lending platforms were shut down in China. This is a direct reaction to the tightening grip of Chinese regulators. The report published in ECNS, states that even tougher oversight is in store for the P2P lending industry as authorities become more vigilant in uncovering fraud and shutting down platforms that do not qualify under Chinese rules.
China published draft rules in 2015 but like many other government initiatives it was not completely clear as to how enforcement would proceed. There have been multiple high profile P2P platforms that have collapsed. The best known is Ezubao that was described as a Ponzi-scheme months before regulators showed up to shutter the doors. Ezubao apparently fleeced investors of over $7 billion – an incredible amount. Allegedly over 95% of the projects listed in Ezubao were faked.
As of June there was an estimated 2,349 P2P platforms in operation in China. Chinese is the largest P2P market in the world.
While Chinese officials are cracking down on dodgy online lenders they do recognize the need for P2P lenders and the demand for access to capital. Authorities have moved slowly, allowing the industry to evolve, before moving in to crackdown. The regulatory interest is not just isolated to P2P lending. Other forms of internet finance are being reviewed including payments and equity crowdfunding.