Why did the Peer-to-peer Lending Market Fail in China?

Sunny Yangguang Huang ()
Additional contact information
Sunny Yangguang Huang: Assistant Professor, Department of Economics and IEMS Faculty Associate

No 2022-61, HKUST IEMS Thought Leadership Brief Series from HKUST Institute for Emerging Market Studies

Abstract: From 2007 to 2020, China's Peer-to-peer lending market experienced a drastic boom and bust, and ended up with zero surviving platforms. The key reason for the collapse of China's P2P sector was that almost all P2P platforms deviate from the role of information intermediary and became shadow banks offering principal guarantee. As the number of P2P platforms increases, each platform has a greater incentive to offer principal guarantee in responses to fierce competition and the lure of financial fraud under limited regulatory capacity. This hurts the investors' and social welfare. The existence of naive investors makes offering principal guarantee more attractive to platforms. Promoting information disclosure may not solve the problem.

Pages: 4 pages
Date: 2022-01, Revised 2022-01
New Economics Papers: this item is included in nep-ban, nep-cna, nep-cwa and nep-pay
References: Add references at CitEc
Citations:

Downloads: (external link)
https://iems.ust.hk/assets/publications/thought-le ... l-in-china-tlb61.pdf First version, 2022 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hku:briefs:202261

Access Statistics for this paper

More papers in HKUST IEMS Thought Leadership Brief Series from HKUST Institute for Emerging Market Studies Contact information at EDIRC.
Bibliographic data for series maintained by Carla Chan ( this e-mail address is bad, please contact ).