The Chinese government legalized peer-to-peer lending platforms in 2015. P2P sites attract money from individual investors – mostly savers – by offering them extraordinarily high yields. They lend this money at high interest rates to borrowers who have trouble getting loans elsewhere – classic subprime. By the end of 2017, there were over 8,000 P2P platforms, according to the People’s Bank of China, with over 50 million registered users. By the end of June, in a little over two years, the industry had gone from zero to $190 billion in outstanding loans.
That was the peak. But the fun didn’t last long. Borrowers defaulted on their loans or just absconded with the money, and the platforms began collapsing. In May this year, regulators stepped in. By the end of July, 4,740 P2P lenders had collapsed or where shut down.