- A good summary by PeerIQ of the latest securitizations of SoFi and Marlette with good comparisons to previous securitizations done by the same firms and other firms.
- Article describing as has been the trend lately, how a German fintech bank partners with Telefonica which has more accounts than CommerzBank and Postbank, combined. Perhaps a template to follow for fintechs and internet companies. Most banks identify non-traditional competitors partnering with fintechs as the biggest threat.
- A short article summarizing the views of different regulators and industry leaders on regulation.
- A fun article naming Lending Club’s new hire from BlackRock, practically, the savior. A little optimism perhaps ?
- Details on Kroll’s rating of the 2nd SoFi Consumer loan ABS.
- A survey of the fintech startups graduating from StartupBootCamp accelerator in New York. 5 bank collaborators, 2 disruptors and 3…I would say also disruptors even if the article claims they are “consumer facing”. Tally : 5 collaborators, 5 disruptors.
- Growth in the UK p2p market stagnates. A short article, I wish was longer and it included more research. But interesting none the less.
- A very interesting article showing how Landbay went from raising £71,590 in crowdfunding to perhaps doing £250 million in origination in 2016.
- The UK flavor or version of SoFi focused on international students, has already lent $200mil. Interesting numbers.
- And a review of the last few weeks of the p2p press in the UK focused on regulation.
- A short article surveying the p2p regulation in Taiwan. ( Written a little bit in Chin-glish).
- A good article on p2p in Korea with a good survey of the state of the market. A good read. Korea’s economy has a respectable size and the regulators are typically very controlling which usually leads to less fraud than in China, but typically more than in Singapore.
- Crowdo receives the Singapore CMS license. A survey of their business in the region as they are also present in Malaysia and Indonesia.
- An interesting chart notably ranking by fundraising the top companies in p2p lending in India. Faircent often claims to be the largest by origination. Is fundraise a better metric ?
- An interesting article showing the evolution of p2p in China, with a great chart. Is China’s present state a good indicator of the future state of p2p in the US and the UK ?
- CreditEase, the owner of Yirenday, raises $200 million for a global PE fund. Interesting.
- In every crisis there are winners. In China’s p2p fraud crisis the winners are the rating agencies. A very interesting article.
- A surprising article describing why China is stuck in a get rich quick series of booms, and criticizing the Chinese government. Quite unexpected.
- United States
- Weekly securitization update (PeerIQ), Rated: AAA
- Counting Down to the Bank of Facebook, (Bloomberg), Rated: AAA
- Marketplace Lending Is ‘Likely Here To Stay,’ But Needs Clearer Regulation, (S&P Global), Rated: A
- Lending Club’s Savior Is Patrick Dunne, (Seeking Alpha), Rated:A
- SoFi Consumer Loan Program 2016-2 LLC (“SCLP 2016-2”) ( Press Release Kroll Bond Rating Agency), Rated: A
- Collaborators Outnumber Would-Be Disruptors at Fintech Demo Event, (American Banker), Rated: A
- United Kingdom
- Growth in UK marketplace lending stagnates, (Financial News), Rated: AAA
- Landbay: From Prelaunch to Established Platform, How Crowdfunding Fueled Business Growth, (Crowdfund Insider), Rated: AAA
- This startup helps people get student loans funded by grads of Harvard, Cambridge, and other top unis, (Business Insider), Rated: A
- Lending Club Scandal Provokes Major UK ‘Peer-To-Peer’ Investigation,(Forbes), Rated: A
- Regulatory Development of Peer-to-Peer Lending in Taiwan, (p2p Banking), Rated: A
- Online Lending Takes Root in Korea, Spurring Rush for Regulation, (Bloomberg), Rated: AAA
- Singapore: Crowdo gets MAS licence for P2P lending, equity crowdfunding, (Deal Street Asia) ,Rated: A
- Should you look at alternative loans?, (LiveMint), Rated: A
- The regulated evolution of P2P lending in China, (Fintech Innovation), Rated: AAA
- China’s CreditEase to Raise $ 200 Million for Private Equity Fund, (Bloomberg Tech), Rated: AAA
- Default Pain Turns Into Gain for China’s Debt Rating Companies, (Bloomberg), Rated: AAA
- China has a boom in ‘get rich quick’ schemes, instead of the economic reform it needs, (South China Morning Post), Rated: A
Weekly securitization update (PeerIQ), Rated: AAA
Counting Down to the Bank of Facebook, (Bloomberg), Rated: AAA
The latest move in upstart finance will soon arrive in Germany, where a new mobile banking service from phone carrier Telefonica will offer checking accounts, a free MasterCard and small instant loans. Telefonica’s partnering with digital bank Fidor, effectively using its license as a springboard for financial services.
It’s a deal that makes sense on both sides. Telefonica wants to assure customer loyalty while maybe gaining a bit of revenue. Fidor needs scale: its customer base of around 100,000 in Germany is hardly the stuff of nightmares for, say, Commerzbank and its 16 million individual customers. But Telefonica’s 43 million customers is a different ballgame.
That’s not to say it’s a recipe for success — telecoms’ past forays into finance have been mixed. Vodafone’s early experiments with mobile payments in Africa were a big success. U.S. carrier T-Mobile started offering pre-paid debit cards and money transfers to customers in 2014, and ended the service this month because it faced too many competitors.
For now, the tech giants have barely scratched the surface. Apple and Google have mobile payment tools, Facebook users can send money to friends through Messenger and Amazon is pitching student loans in partnership with Wells Fargo, but they’re not exactly setting the financial world on fire. Their Asian cousins are more advanced: WeChat and Tencent can now be used to pay for everything from rent to a taxi, and Alibaba runs mutual funds.
They’re set to be the main competitors for the payments business in Europe, according to 96 percent of respondents to a Finextra/FIS survey of finance companies last year.
This doesn’t have to be just a nightmare for incumbents. It could be an opportunity. European banks could lift pre-tax profits by 40 percent in five years if they find the right way to limit the impact of disintermediation and capitalize on new tech, according to BCG Partners.
With more ventures like Telefonica’s on the way, expect the pressure to rise.
Marketplace Lending Is ‘Likely Here To Stay,’ But Needs Clearer Regulation, (S&P Global), Rated: A
Edith Ramirez, chairwoman of the Federal Trade Commission, acknowledged the significant growth of the marketplace lending industry during a June 9 forum hosted by the FTC, the first in a series of events focused on fintech. She mentioned the “rocky spring” for marketplace lending and noted reports that show flagging investor interest in the space. Still, Ramirez said that the potential benefits of the services provided by this new breed of financial institution mean that marketplace lending is “likely here to stay.”
“It’s not a good idea to look at the bank model and just port that over and drop it on,” Knight added. “They are different models and they generate different risks and the regulation should reflect that.”
Conor French pointed out that the regulatory environment in the U.K. is easier to navigate for online lenders who are overseen directly by the country’s Financial Conduct Authority.
Lauren Saunders, associate director at the National Consumer Law Center, pointed to the need to “flush out the bad actors” from the marketplace lending industry.
French of Funding Circle pointed out that the traditional lending choices in the financial services industry are not working. They are leaving many consumers “underserved and underbanked,” he said.
Jessica Rich, director of the Bureau of Consumer Protection at the FTC, said that it is “encouraging to learn that marketplace lenders are taking proactive steps to self-regulate.” Still, she pointed out that self-regulation is “not enough.”
Lending Club’s Savior Is Patrick Dunne, (Seeking Alpha), Rated:A
Lending Club hired Patrick Dunne as its Chief Capital Officer.
Patrick Dunne brings a global network of contacts to Lending Club and has experience in dealing with failed products.
Patrick led the growth of BlackRock’s iShares business, whose products often got shut down.
Patrick has worked as a strategist, whose job is to convince clients that a certain trade is attractive.
Adventurous investors may want to pick up shares on the revival of Lending Club’s growth.
SoFi Consumer Loan Program 2016-2 LLC (“SCLP 2016-2”) ( Press Release Kroll Bond Rating Agency), Rated: A
This transaction represents SoFi Lending Corp.’s (“SoFi”) second rated securitization collateralized by a portfolio of unsecured consumer loans. SoFi currently originates personal loans through its 21 state licenses or complies with certain requirements where a state lending license is not required. There was one prior unrated securitization, in which SoFi or SoFi’s institutional investors were the sponsors and the collateral was unsecured consumer loans.
Please click on the link below to access the full report: SCLP 2016-2
Collaborators Outnumber Would-Be Disruptors at Fintech Demo Event, (American Banker), Rated: A
“Fintech is destroying legacy systems and legacy attitudes,” declared Jesse Podell, the emcee and managing director of startupbootcamp FinTech New York, bounding on and off the stage in high spirits.
Five of the 10 graduates from the startupbootcamp accelerator program pitched technology designed to be used by traditional banks.
AlphaPack‘s product, Sandbox, gives banks a safe place to try out new technologies from fintech partners.
Fluent, a startup that began in Kentucky and is migrating east, has a blockchain-based platform for the $6 trillion trade finance space.
RepreZen set out to solve a longstanding problem for banks: data integration.
VendorMach provides what it calls an “early warning system” for vendor risk management. The software is designed to monitor banks’ vendors for signs of liquidity risk, data breaches and other potential issues.
Visualize Wealth has created white-label software for banks to embed in their mobile apps, to give their customers a view of their investments and an objective sense of how those investments are performing.
CFX has built an online trading platform for private real estate investment trusts, a market the startup pegs at $84 billion, with 1.2 million retail shareholders.
Factury has a blockchain-based lending platform. “The lending industry is filled with fraud and inefficiency at every level,” said Arturs Ivanovs, Factury’s chief marketing officer. “It’s mostly driven by paper-based processes and human labor. Only 7% of this industry is digitized.” Distributed ledger technology will be the fundamental infrastructure for the lending industry, he said.
Seal has built mobile payments into its app providing professional agreements.
token says it’s working to make credit card fraud a thing of the past. “Our credit cards get stolen every day when we shop online,” said Yana Zaidiner, token’s chief operating officer. The firm’s mobile app lets people use a pseudo credit card and payment identity while keeping their real payment information hidden, similar to another startup called Privacy.com.
Lawnmower.io made a pitch that’s even more meta and of-the-moment than AlphaBox’s: a mobile app for investing in blockchain assets.
Growth in UK marketplace lending stagnates, (Financial News), Rated: AAA
Alternative finance data provider AltFi Data estimates that UK P2P platforms will have originated between £260 million and £290 million in loans July, in line with the amount lent monthly since April.
Origination had grown rapidly up to March, when lending spiked to reach £345 million.
He said: “It’s too early to tell what the impact of Brexit has been on origination volumes in the marketplace lending industry. We do know that volume growth has been tepid for the last nine months – long before Brexit was dominating the headlines. Brexit, however, may be added to the potential headwinds facing the industry.” According to AltFi Data, the sector has been experiencing a decline in its monthly net lending growth, which measures the change in outstanding principal. Net lending at the UK’s top four platforms was £44 million in June, down 37% from the previous month.
Rhydian Lewis, the chief executive and co-founder at RateSetter, said: “In recent months there’s been a levelling-off in general borrower demand as people defer large purchases, perhaps reflecting economic uncertainty. A more longstanding thing in our sector specifically is that platforms’ focus has been on sustainability rather than growth, with, for example, the involved process of gaining full regulatory authorisation.”
Landbay: From Prelaunch to Established Platform, How Crowdfunding Fueled Business Growth, (Crowdfund Insider), Rated: AAA
John Goodall and Gray Stern launched their company, Landbay, with the help of Seedrs. Before their website was even live, Goodall and Stern were raising seed capital on the crowdfunding platform for their vision of mortgage finance. Their first funding round was for only £50,000 in SEIS eligible seed funding. The round closed in December of 2013 at £71,590 with a pre-money valuation of £616,667.
Jump forward three years and several crowdfunding rounds later, and Landbay, a peer to peer lending platform for secured property loans, has now financed over £42 million for hundreds of mortgages. Landbay has joined the highly respected UK P2PFA, received an investment from Zoopla and reported a £250 million wholesale funding line provided by a European asset management firm and a major bank. Landbay is now moving forward with a strategy of balancing retail investors and institutional money and ultimately securitization. These are a step stones to furthering growth as Landbay has captured traction as a niche player in the vibrant peer to peer lending market in the UK.
We chose crowdfunding as we have found it to be an effective marketing channel to increase brand awareness and to build a network of users from day one, whilst of course raising capital!
Things are going really well at Landbay. It’s now been two years since our first loan completed, and we’ve lent a total of £42.78 million – in fact, we were 2015’s fastest growing peer-to-peer lending platform in the UK.
This startup helps people get student loans funded by grads of Harvard, Cambridge, and other top unis, (Business Insider), Rated: A
Prodigy Finance has so far lent $200 million (£152.7 million) over its platform since launch in 2008, but CEO and cofounder Cameron Stevens believes loans will total $500 million by the end of the year thanks to several big institutional clients who are set to partner with the platform.
Stevens says: “If you’re coming from India and you’ve been accepted to Harvard or London Business School or wherever it may be — all of the domestic students can access finance but if you’re coming and you’re crossing a border, none of your credit history is following you and you’re excluded from all of that.
Prodigy Finance has so far provided student loans to 4,500 people, with an average loan size of $40,000. Most of the funding goes towards post-graduate students who are looking to do an MBA or similar. Stevens says it has a 99% repayment rate on its loans.
Lending Club Scandal Provokes Major UK ‘Peer-To-Peer’ Investigation,(Forbes), Rated: A
Comment: This article brings no new point of view or additional information but summarises well the last few weeks of press in the UK on p2p.
Campaign for Fair Finance (CFF) founder Dr Roger Gewolb has welcomed the intervention of the UK Financial Conduct Authority’s (FCA) new chief executive Andrew Bailey as an investigation gets underway into peer-to-peer (P2P) lending, a relatively new internet-based way of obtaining a loan. It comes amid concerns in the US and UK about how safe the sector is and protections afforded to consumers.
The P2P lending market in the UK grew to over £2.3bn in 2015 from £1.2bn of new lending in 2014 according to data sourced directly from P2P platform loan books and proprietary BondMason research. It has been predicted that while the rate of growth will slow, a further £1bn to £1.5bn will be added in 2016.
“We want crowdfunding and peer-to-peer lending to succeed,” states Gewolb, a British American financier and consumer protection advocate. “We need an alternative to the tired old banks, but they need better oversight without regulating or legislating them out of business.”
Turning to Andrew Bailey’s first grilling before the Treasury Select Committee earlier this week on Wednesday 20 July, the new CEO of the FCA, a main UK financial regulatory body that operates independently of the government, said that he was actually concerned about the way peer-to-peer lending is sold to consumers. And, he believes lenders get very close to promising investors they will get their money back, plus the interest they have been promised.
However, this cannot in fact always be guaranteed in all instances as P2P lenders are not protected by the UK’s government-backed Financial Services Compensation Scheme (FSCS). Any funds lent through a P2P website are not covered by the FSCS, which by contrasts with safeguards traditional bank savers have for up to £75,000 (c.$100,000).
Mr Bailey also even warned that he felt there were similarities in the way UK’s P2P lenders operate to those of Northern Rock, a British savings bank that crashed mightily and had to be bailed out by taxpayers’ money during the financial crash of 2008. One wonders if it could all happen again.
Recently, other questions have been raised about how safe P2P lending actually is. Highlighting matters, Funding Knight, a UK P2P website platform that promised investors returns as high as 12% for lending money to small businesses, was rescued by investment firm GLI Finance earlier this July after falling into administration (a British form of ‘Chapter 11’). Hundreds of people had feared that they would lose all of their money when the company simply ran out of cash.
Gewolb stresses vigorously too that: “The P2P platforms are clearly competing for bank deposits from the public, and yet they are running without anything near the strict supervision, transparency, independent oversight and protection that banks in the UK are subjected to as a matter of course.” “As things stand, the P2P loans market is relatively untried, untested and not vigorously regulated. Who is looking out for the consumer if it all goes wrong?,” asks Gewolb. He has a point.
“We are here to help,” explains Gewolb. “Whilst we want the industry to survive and thrive, we fear that to date there is not the requisite amount of transparency and independent oversight needed.”
“At the same time we are concerned that there could be over reaction by the regulators and the industry could be regulated out of sight,” argues the campaigner. As the Chinese proverb goes ‘Be careful what you wish for – You just might get it’.
Regulatory Development of Peer-to-Peer Lending in Taiwan, (p2p Banking), Rated: A
Comment: the language in the article seems translated from Chinese.
In order to encourage and accelerate the development of fintech industry in Taiwan, the financial authority, Financial Supervisory Commission (FSC) of Taiwan, has published Fintech Development Strategy White Paper on May 2016[i]. One of main goals is evaluating the possibility of introducing the mechanism of P2P lending into Taiwan’s capital market and providing a regime for regulating this industry.
Some business models of P2P lending are forbidden due to conflict with The Banking Act[ii] in Taiwan. Recently, it is considered to be introduced in Taiwan and evaluated by the recently established project team of the financial authority in Taiwan, Financial Supervisory Commission (FSC)[iii]. Despite the fact that the attitude toward P2P lending industry of financial authority in Taiwan is still vague, as of July 2016 there are three P2P lending platforms already providing their services in Taiwan, including Lend & Borrow[iv], Wow88[v], XiangMinDai[vi]. They have tried to design their business model to avoid potential legal risks. For better understanding of the P2P lending industry, this article tries to provide a brief regulatory overview of Taiwan in following part.
Currently, there is no any specific regulation toward this industry in Taiwan. Although there is no financial regulation of P2P lending in Taiwan, Banking Bureau of FSC has issued a statement[ix] on April 14, 2016, pointing out some legal compliance issues for P2P lending platforms, including (1) platforms should not involve in issuing any securities, (2) ensure privacy of customers, (3) activities of deposit and store-value business without licenses are forbidden, (4) illegal ways of debt-collection is forbidden.
Online Lending Takes Root in Korea, Spurring Rush for Regulation, (Bloomberg), Rated: AAA
South Korean investors beset by Asia’s third-lowest benchmark yields are embracing peer-to-peer loans that offer average rates of about 9 percent and not a lot of information about where the money winds up.
The nascent online P2P lending market more than doubled to 72.4 billion won ($63.7 million) in the first three months of 2016, Korea’s Financial Services Commission reported on July 12. Cumulatively, P2P loans made since 8Percent became the first platform in December 2014 totaled 153 billion won as of June, the Korea P2P Finance Association of 22 companies estimates.
The expansion is being stoked by South Koreans’ desperation for returns, with the yield for 10-year government bonds slumping to 1.42 percent last week. That’s lower than every Asian nation apart from Taiwan and Japan. The rapid growth has added to urgency for Korea’s government to protect investors from potential fraud, and the Financial Services Commission held a meeting Friday to start drafting industry guidelines. China cracked down last year after a site called Ezubao was alleged to have cheated 900,000 investors.
“You must watch out because many P2P businesses don’t clearly disclose where the investment money goes,” said Park Tae-woo, a credit analyst at Samsung Securities.
P2P lenders such as 8Percent, Funda and Midrate directly match lenders with individuals or businesses in need of money. The industry generally offers average rates of about 9 percent to 10 percent, according to the firm 8Percent. The Bank of Korea on July 14 held its benchmark interest rate at a record low 1.25 percent.
Singapore: Crowdo gets MAS licence for P2P lending, equity crowdfunding, (Deal Street Asia) ,Rated: A
Singapore-based crowdfunding platform Crowdo has received its full Capital Market Services (CMS) licence from the Monetary Authority of Singapore (MAS) for securities crowdfunding (SCF) to deliver both peer-to-peer (P2P lending) and equity crowdfunding.
The Securities Commission Malaysia is currently in the midst of operationalising P2P financing for small and medium businesses by 2017. It has called for submissions from those interested in launching P2P financing platforms and had reportedly received about 100 submissions.
Crowdo’s platforms in Malaysia and Indonesia were started just a few months of each other. Since then, the ECF platform in Malaysia has gone on to help facilitate both the largest ECF offer in the region and the first ECF offer lead by a venture capital firm Gobi Partners. On the Indonesian lending platform, it has processed more than 600 loans with zero defaults.
“The license granted to us by MAS effectively makes us the first and only operator in Southeast Asia that can undertake P2P lending under a full license. We are here to stay and to play our part in making Singapore a truly exciting global fintech hub,” it said.
Should you look at alternative loans?, (LiveMint), Rated: A
There is a high rate of technology adoption in the SME segment and most of the applications get completed online, he said. Capital Float lends Rs.50,000 to Rs.1 crore, for tenors of 60 days to 4 years, with interest rates in the range of 16-19% per annum, Rishyasringa added.
The regulated evolution of P2P lending in China, (Fintech Innovation), Rated: AAA
The latest regional report on Alternative Financing published by the University of Cambridge, Tsinghua University and University of Sydney in partnership with KPMG titled “Harnessing Potential: The Asia Pacific Alternative Financing Benchmarketing Report” positions China as the world’s largest alternative finance market with transaction volume in excess of US$101.7 billion in 2015 – almost 99% of the total volume of Asia Pacific.
The online alternative finance market in China grew from US$5.56 billion in 2013 to reach US$101.7 billion in 2015 averaging 328% growth rate over two years. Peer-to-peer lending, both consumer and business together, account for about 91% of all alternative financing in the mainland.
Peer-to-peer (P2P) lending remains the popular option for consumers and small and medium-sized businesses (SMBs) in China that otherwise would have difficulty getting funding from banks. The lack of regular oversight during the early days of P2P lending in China has led to a mushrooming of online lending platforms with some estimates of as many as 2,595 P2P platforms in 2015. The closure of over 896 such platforms in 2015, in addition to high profile scandals such as the eZubao Ponzi scheme, has prompted the China Banking Regulatory Commission (CBRC) to released new rules.
China’s CreditEase to Raise $ 200 Million for Private Equity Fund, (Bloomberg Tech), Rated: AAA
CreditEase Group, which runs a wealth manager and peer-to-peer lender Yirendai Ltd., is seeking to raise $200 million for a global private equity fund as Chinese individuals step up investing abroad.
The fund, which CreditEase started in May, invests in companies directly as well as private equity funds. Representatives from KKR and Blackstone declined to comment.
A separate $80 million pool has invested $50 million in consumer loans from U.S. Internet lenders Prosper Marketplace Inc. and Avant Inc., according to Williamson. The firm has also set up funds focusing on areas such as financial technology and real estate both overseas and in China.
CreditEase distributes products through its 3,200 wealth advisers from about 150 offices in China. The wealth business had more than $6 billion of assets under management at the end of last year. The firm is the majority shareholder of Yirendai, the first Chinese online-loan platform to obtain an overseas listing. Shares of Yirendai have more than doubled in New York trading this year.
Default Pain Turns Into Gain for China’s Debt Rating Companies, (Bloomberg), Rated: AAA
China Bond Rating Co. started selling “The Riskiest Chinese Bond Issuer List” this year and has offered more training sessions to financial institutions than in the whole of 2015. Golden Credit Rating International Co. said it had set up a new department to address investors’ inquiries and provide seminars. S&P Global Ratings and Moody’s Investors Service also reported a spike in interest from fund managers.
Chinese regulators have stepped up controls on rating firms after investors expressed dissatisfaction. The China Securities Regulatory Commission said in March it had issued warning letters to six of them on violations.
Dagong Global Credit Rating Co., Shanghai Brilliance Credit Rating & Investors Service Co., China Chengxin International Credit Rating Co. and China Lianhe Credit Rating Co. cut a record 88 bond issuer ratings in the first half of this year, compared with 57 downgrades in the same period of 2015, according to data compiled by Bloomberg. Corporate bond defaults dropped to zero in July, from one in June and five in May, amid signs that local governments are helping companies in financial trouble.
China Bond Rating’s Yang said there has been an “obvious” increase in foreign investor subscriptions to the firm’s list of the riskiest bonds. It provides risk appraisal on debt portfolios for investment firms, and started issuing a daily report evaluating newly sold notes from February. The firm has trained almost 1,000 people nationwide on credit risk management through 10 workshops it has held this year, up from 7 in 2015.
“The surging defaults are giving space for rating agencies to develop risk management businesses,” said Fullgoal’s Ye. “But Chinese regulators should make sure there are firewalls between a ranking company’s rating and investment advisory services.”
Luo Guang, chairman of Golden Credit, sees more defaults in the second half than the first.
China has a boom in ‘get rich quick’ schemes, instead of the economic reform it needs, (South China Morning Post), Rated: A
The Chinese government has been promoting the slogan “All People Innovate, Tens of Thousands Start Business”. This movement is becoming a bubble with tragic consequences down the road. Starting a business is hard. Innovation is harder.
The start-up mania won’t solve China’s economic difficulties. The economy has been in the doldrums for four years because the government is not addressing the structural problems. The truth is that the investment and export-led model has run into a brick wall; the world is just not big enough for China to develop like Japan or the Asian tigers.
China’s needed reforms are not coming because they conflict with the political doctrine of concentrating economic power in the state sector. Hence one bubble after another has been stoked in the hope that a miracle would happen to the economy without the need to shrink the government.
P2P is the latest, but by no means the biggest, example of the true nature of China’s bubbles. They are about robbing the masses to enrich the few, all in the name of innovation or boosting the economy.
“Get rich quick” is the reigning ideology today, especially for the young. Nothing fits the description better than the internet bubble.
China should stop chasing pipe dreams and get back to basics. Its economy has great potential. Its per capita income could be doubled just by carrying out proper reforms: first, household disposable income should be lifted from 40 to 60 per cent of GDP; second, investment should decrease to 30 per cent from half of the economy; and third, the market, not the National Development and Reform Commission, should decide where and how much to invest.
The hard part is that all these necessary reforms depend on shrinking the state sector and limiting government power. China’s future depends on it.