Many Chinese P2P lending platform companies have grown rapidly in recent years. Now some struggling Chinese companies are turning to P2P platform in order to finance themselves. Internet financial industry is under-regulated. Many borrowers are usually considered to be high risk borrowers. Many of the struggling companies are raising money for their rollout programs. Because the interest rates on the P2P platforms are generally very high, many individuals lend their money on these platforms in order to have some high returns in the future. If there is enough money on the platforms for the companies to borrow, the companies can pay back their debts by borrowing more. However, if suddenly there is a company that is unable to borrow enough funds to pay back its loans, then it could lead to people questioning other companies' ability to pay back their loans. People would stop lending, and all the companies that use P2P borrowing as a rollout instrument will bankrupt. The individual creditors will lose some of their wealth. It may not sound as scary as the subprime crisis; however, they have a similar cause, "unreliable borrowers"; if the scale of P2P finance becomes larger, the effect of such problem will be multiplied and damage the Chinese economy.
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