On the other hand, an article recently published by the Financial Times reported that P2P lending in China is in fact declining. Social lending emerged already a few years ago in China, growing from $30m in 2009 to $940m in 2012 and it is predicted to reach $7.8bn by 2015. Almost 1,000 players have entered the marketplace, but more or less half of them - especially the smallest portals - were declared bankrupt at the end of 2013. The main reasons for the several shut downs are said to be found in a loss of faith by lenders, in the liquidity squeeze enacted by the Central Bank at the end of the year and also in the intense market competition. Thus, the future of P2P lending China could be less positive than what has been predicted last year and more uncertain.
The situation for crowdfunding seems to have both good and bad aspects at the moment. Crowd Valley asked to Jing Jing, part of the management team of Kapipal and an expert on the Chinese market, to share her views and knowledge on the crowdfunding market:
“China is a country whose economy is growing very fast, yet the regulations are often trying to catch up with the growth. The same happens with P2P lending, which developed very rapidly without regulations. As a consequence, investing through P2P lending portals can be quite risky: not many players are carefully warning the lenders of the potential risks they run, because they are not obliged to do so. On the other side, the websites are promoting to borrowers the fact that no guarantee on loans is needed. This situation can be quite misleading for the users who might blindly invest through P2P lending platforms and potentially end up with sad situations”, commented Jing Jing. She concluded, however, with a quietly positive note: “nevertheless, there is a good chance that P2P lending and other crowdfunding models will establish in China, but there is a need for regulations to be implemented.”
Even if crowdfunding has appeared in the Chinese market, obtaining the favor of many of its users, it still has to establish as a valid and safe funding source. To do that, however, the intervention of the authorities is necessary, in order to create a regulative framework. Will China be able to respond to this need?
Gewirtz J. (2014). Crowdfunding in China. Dawn.com.
Rabinovitch S. (2014). Reversal of Fortune in China's Peer-to-Peer Lending Boom. Financial Times.
Image credit to: epSos.de
Born and raised in Milan, Italy, Irene is an International Business graduate, with a strong interest for innovative ideas that can simplify our lives.
During her studies, she co-founded an online community for sportspeople and worked in marketing positions at Ogilvy & Mather Advertising and at the European Business Angel Network, in Brussels. She is a passionate blogger about crowdfunding and the startup ecosystem.