Why China’s P2P meltdown will allow the industry to thrive

China’s online lending bubble is on the verge of bursting after a mass closure of peer-to-peer lending sites. It is an inevitable step to a healthier development of the market.

“Apply in one minute, review in one minute, and get your money within two minutes,” This advertisement by a Chinese peer-to-peer lending platform highlights just how quick and easy it is to borrow money online. But this is unlikely to last any longer.

China’s booming fintech industry, once seen as a golden investment opportunity, is being challenged amid a massive wave of defaults by peer-to-peer lending platforms in recent months. Since June, more than 200 online microlending sites have shut down, and many of the founders have gone missing.

The P2P scandal reached its zenith on August 6 when thousands of petitioners, all claiming to have suffered...

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