Guiding the Healthy Development of the P2P Industry and Promoting SME Financing

Peer-to-peer lending (P2P lending) is currently one of the fastest growing innovative Internet finance models, under which P2P companies provide platforms that match borrowers and lenders directly to conduct lending and financing activities. Compared with traditional financial institutions, P2P has a significant advantage in reducing fixed costs and transaction costs. In 2007, China's first P2P lending platform was established. Along with the gradual promotion of market-oriented interest rates and the boom in private financing and lending activities, P2P lending showed an explosive growth after 2010. However, 2013 saw an explosive growth as well as a wave of company closures in the P2P industry. The entire industry is facing a reshuffle due to being exposed to risks, and urgently requires the establishment of a regulatory regime to stabilize the market order and maintain the interests of investors. This paper analyzes the development of P2P lending process, models and platforms in China, discusses the reasons for the entire industry's low ability to resist risks from a number of aspects, and proposes solutions and suggestions such as "legislation first, flexible regulation, and self-regulation".