Regulation desperately needed for peer-to-peer lending

By Tian Lei, Zhonglun W&D Law Firm

Peer-to-peer (P2P) lending means an individual or a corporate body lends to, or borrows from, another through an independent third-party online platform. That is to say, a P2P lending platform serves as an intermediary platform on which a borrower offers a bid for borrowing, while investors bid for the borrowing and lend it to the borrower. In this online lending method, the lender earns interest income and bears risk, while the borrower repays the principal together with interest when due, and online credit companies charge an intermediary fee.

A P2P lending platform was established in 2007 in China. Several years later, there were few online lending platforms in the country, with few entrepreneurs involved. It was not until 2010 that entrepreneurs began taking a fancy to online lending platforms and testing the water. Online lending platforms entered a period of rapid development in 2011, with a batch of enthusiastic lending platforms going online.

田磊 Tian Lei 中伦文德律师事务所 合伙人 Partner Zhonglun W&D Law Firm
Tian Lei
Zhonglun W&D Law Firm

Speedy growth

Development accelerated further from 2012 to 2013. Especially after September 2013, online lending platforms were growing at a speed where three to four platforms were being launched every day. According to www.01-DataStorage.Com, there were nearly 700 types of online P2P lending platforms across the country by the end of 2013, more than five times the total of 110 platforms in 2012, while annual turnover amounted to about RMB110 billion (US$17.8 billion), 10 times the turnover of RMB10 billion in 2012.

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