The Role Politioning And Regulation Of Chinese P2P Lending Platforms

This paper tries to open a new perspective on the functions, characteristics, strategy choice, development direction and regulation system of the P2P Lending Platforms, following such study clue-Firstly, create a theoretic framework to define and clarify the different roles of P2P Lending Platforms; Secondly, discuss how to regulate Chinese P2P Lending Platforms efficiently. This paper consists of seven chapters and the core chapters are Chapters 3-6.Chapter 1 introduces the research background and research design. At the beginning of Chapter 2, we explore the economics theories foundation on the development of Internet Finance by combining Industrial Economics, Information Economics and Financial Intermediary Theory with the analysis on real practices in its sub-areas in China. Then we synthesize research production about P2P Lending Platforms’operation models, fuctions, risks and restriction. There are several main regulation mechanisms, including reputational restriction, lawsuit, alternative dispute resolution ("ADR" for short), and administrative supervision. We sum up the study about each mechanism and their mutual relationships respectively.Based on the literature learning, we distinguish P2P Lending Platforms into three kinds of roles-the Information Intermediary, the Credit Intermediary and the Credit Safeguard Intermediary. We compare the different roles in China and foreign countries, followed by the analysis of how these differences arise. In the last part of chapter 3, we focus on if the Credit Safeguard Intermediary could attract more investment through a simple empirical study.Using for reference the classcic Information Discrimination Model, we check how each type of P2P Lending Platform chooses the optimal action in the agency-commission relationship with investors in the first part of Chapter 4. By establishing an evolutionary game model, we explain the evolutionary process of mainstream role in P2P Lending Platforms Group and portray the growing path in China to propose the due role at the present stage. According to the reality of Chinese social credit system, information technology and venture level in P2P Lending market, employing outer credit safeguard as a transitional pattern turns out to be the better way than straightly transferring all the P2P Lending Platforms into the pure information intermediaries following the law. In the long run, the information intermediaries that offer outer credit safeguard or the pure information intermediaries may occupy the mainstream status.For the sake of investor-protection and the healthy and stable development of the whole industry, the P2P Lending Platforms should be effectively restricted. However, no widely-accepted selecting and allocating rule of the regulation mechanisms has come forward so far. Chapter 5 indicates:Each mechanism should be implemented according to the constraint objects’patience level respectively. (1) Organization-based reputational restriction is effective only when the P2P Lending Platforms are patient enough, and we can pick up the best mechanism by taking organization-based reputational restriction, ADR and administrative supervision into consideration in a unified numerical simulation to compare the total social surplus of each other. (2) Based on the investigation on relative efficiency of ADR and lawsuit that both can set feasible punishment and provide compensation for investors, we find that the objects with less patience should be regulated by ADR when there is no administrative supervision, and be regulated by the combination of ADR and lawsuit after the administrative supervision starts, but we can only rely on lawsuit when ADR runs out.(3)The targets with extremely little patience should be subject to criminal sanctions when they poach the investors’ investments. (4) The administrative supervision is able to restrict all the P2P Lending Platforms’ routine activities by means of imposing a fine. Meanwhile, the administrative supervision could develop the ability of lawsuit to survey irresponsible behaviors but would narrow down the range where organization-based reputational restriction takes effect.Chapter 6 reviews the evolution of restriction models of P2P Lending Platforms and suggests that comprehensive regulation system combining several mechanisms under administrative supervision should be adopted in China. The regulators ought to show great inclusiveness and keep to the Suitability Principle in the transition period. Under new rules, we make some suggestions on intensifying the building of legal system, supervision system, reputation system and ADR system to guide and regulate Chinese P2P Lending Platforms. At the end of this paper, we summarize and look forward to the future research areas.