China’s P2P lending shows both growth and risk  

中國網貸行業“冰火兩重天” 跑路倒閉者占一成

Shanghai (ECNS) – China's peer-to-peer (P2P) lending boom has given rise to platforms that are doing well and ones that aren't.

According to an internet finance report released Wednesday by Rong360, a leading financial service website, by the end of July, China had about 1,200 P2P loan websites, 136 of which had seen cash problems or even collapsed.

P2P lending websites bypass banks to match borrowers and lenders directly, to grant small loans ranging from a few thousand yuan to 1 million yuan.

China's first P2P loan website went online in 2007. The industry took off in 2013 with one to two websites going live each day, and it continues to boom this year. According to Rong360, by the end of July there were 190,000 borrowers and 440,000 lenders.

Another report released by Xinhua News Agency and the China Internet Association shows that the amount of P2P transactions in the first half of 2014 jumped to 100 billion yuan ($16 billion), almost the entire amount for 2013.

Lufax, funded by Pingan Group, a big insurance and finance company, is the leading P2P platform, with 400 million yuan ($64 million) in registered capital.

The industry has its dark side, however. In many cases, loans are unsecured personal ones and borrowers do not provide collateral against default. Some illegal fundraisers even use P2P lending platforms for fund pooling, or create financial scams under the disguise of high-yield investment products.

Yet Rong360 analyst Zhang Yiwang says the prospects are bright. With higher bars and stricter legislation, less competitive companies will be pushed out of the playground and the market will become more regulated, he said.