China’s unruly peer-to-peer lending — the focus of 21 arrests of people involved in “a complete Ponzi scheme” — ballooned in size last year as credit-starved private companies paid swingeing interest rates to secure loans.
Lending by P2P institutions rose by Rmb982bn ($149bn) last year, up from the Rmb253bn that was lent out in 2014, according to industry data compiled by Wind Information, a Chinese data company. However, because most P2P loans are repaid quickly, the value of total loans outstanding at the end of last year was only Rmb439.5bn, Wind data show.
These numbers mean that while P2P lending was one of the fastest-growing segments in China’s financial system last year, it remained a relatively minor contributor to overall credit expansion. Total social financing, the widest official measure of credit, eased 7 per cent year on year in 2015 to a total of Rmb15.3tn ($2.3tn). Some Rmb11.3tn of this total came in the form of bank loans.