Problems and solutions with China’s P2P lending regulation

Abstract

Here we find out the problems and possible solutions with China’s P2P lending regulation on the basis of above chapters’ analysis and conclusions. The main problems and corresponding solutions are as follows: •China’s current regulation pattern of institutional regulation is not effective, creating legal blankness and blurs. China is supposed to implement the functional regulation system as an alternative.•It is reasonless to assign local governments to regulate P2P lending within respective jurisdictions, as P2P lending has the nature of revenue localization but risk nationalization. Banking regulatory bureaus that are vertically managed by the central government are more suitable to become local regulators for P2P lending.•China’s P2P lending industry association still has a great distance to become a real industry self-regulation organization like P2PFA in the UK, since that it has a too low coverage rate. Eligible platforms should be required to join in the industry association to improve the association’s management effectiveness.•Establishing a new P2P lending database is a waste of current resources. The PBC credit reference center is a relatively well-developed credit review system. If P2P platforms are permitted to access to the PBC credit reference system, there is no need to invest more financial and material resources in founding a new database.•Regulation on securitization in P2P lending industry is ignored by the regulators. P2P lending securitization is an inevitable trend, which needs scientific guidance and standardization. The problems of risk responsibility subject, information disclosure, and excessive securitization should be paid more attention when designing related mechanisms.•Rules about risk reserve mechanism are omitted by the regulators. Real risk reserve funds can protect investors to some extent and will not result in liquidity risks for platforms. A qualified risk reserve mechanism should be independent, with limited protection, and full information disclosure.