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China’s Poor P2P Lending Models

China’s Poor P2P Lending Models

The Chinese dream of obtaining funding freely and easily has come up against harsh reality in the peer to peer (P2P) lending industry. Although P2P company Renrendai announced in January that its parent company had received $130 million in Series A funding and Dianrong.com announced $12 million in first round lending, the P2P lending industry has experienced a growing number of platform collapses or withdrawal difficulties, with 58 companies going bankrupt in the fourth quarter of 2013.

Some analysts have likened the P2P lending model to a “Ponzi scheme,” attracting lenders through high interest rates, and using the lent funds to pay off preceding lenders. In the most recent P2P news, three P2P lending platforms in Hangzhou, Shenzhen and Shanghai collapsed, and their owner is nowhere to be found.

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