China’s peer-to-peer lending crash

Last summer, more than 400 peer-to-peer (P2P) lending platforms in China collapsed, costing thousands of Chinese millions in lost investments. The reason for their collapse is due to the lack of regulation governing them and that many of them are actually a fraud, essentially online Ponzi schemes. Amazingly, there are still about 1,800 P2P platforms operating in China; however, most Chinese financial experts expect that number to fall to less than 200 once the dust settles. No doubt this further reduction in number will impact the financial status of thousands of more Chinese people in the near future.

P2P lending platforms in China have attracted 50 million users since its boom period started in 2012, reaching a total investment amount of USD 200 billion in June 2018. Now, the Chinese government is seeking to increase control over financial companies operating outside of the traditional banking sector, including P2P lending platforms. For many, however, these efforts will come too late as many families have already lost their savings and risk not being able to live up to their financial obligations.

Source: www.bloomberg.com