REGARDLESS OF MEASURES to ease credit markets to offset any slowing of GDP growth, authorities continue to crack down on the more risky parts of the financial system.
Few pieces of it are as hazardous and ill-regulated as peer-to-peer (P2P) lending.
China has the world’s largest P2P lending industry, worth approaching $200 billion (assets, i.e. loans outstanding) flowing through (now) some 2,000 platforms with 50 million registered users.
The ranks of the P2P platforms are thinning fast, as individual operations fail — some 80 in June (a then monthly record) and around a further 120 so far this month, taking the cumulative number of failures since 2013 above 4,000 according to the Yingcan Group, a Shanghai-based research firm that tracks P2P finance.
Savers are pulling their money from many of the remainder and investors have little confidence many will survive, both factors compounding the accelerating pace of failures. Meanwhile, authorities will be worried about the pick up in the pace of failures over the past week.
Their challenge is to stop a so-far contained panic spilling over into other parts of the $10 trillion shadow banking industry and thence into the main financial system.