Specifically, 77 P2P platforms were closed in 2013, with RMB1.5 Billion of lenders’ money lost. In 2014, it seems to be getting worse, in the first half of the year 55 more platforms were closed and the cumulative value lost reached RMB 0.6 billion.
We think the chaotic state of affairs in P2P platform industry is due to dubious business activities of most platforms, which in turn was caused by low threshold to enter, and no clear regulation or guidelines for the industry. P2P platforms are supposed to perform intermediary functions, but often act as financial institutions to attract funds. In addition, some P2P platforms are used as a cover for business fraud. Once enough capital is raised, legal representatives will disappear. Moreover, some P2P platform founders use P2P as a way of raising funds to reinvest in their real businesses.
