China’s troubled peer-to-peer (P2P) industry could be on the verge of collapse, say industry leaders, as new regulatory restrictions are set to cut the numbers of operating firms from the thousands to as few as 50 in the next year.
Online lending has exploded in China in recent years, with firms taking advantage of an under-regulated environment and millions of Chinese citizens eager to find routes to credit. The industry is now worth about $120 billion, says the Financial Times.
A string of defaults sparked by a government crackdown earlier this year shook confidence in the market, with many investors taking to the streets to protest and some creditors running off with funds.
China’s financial regulators plan to cull the number of licensed firms to a few dozen that meet a list of strict criteria. Executives from some of China’s largest P2P platforms think that this process could come in the next 12 months.
“The licensing is pretty much a prolonged process designed to flush out P2Ps,” said Roger Ying, founder of Pandai.