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China to Shrink P2P Lending

The massive alternative capital unleashed by peer-to-peer lending in China is coming to scrutiny as default rates increase. China plans to shrink or further tighten regulations in the sub-sector. But this is not just going to be China: if U.S. bleeds more stock values, p2p lending will not be the same. And if recession does happen, most of the loans would go bad as many may lose their jobs. This sector has promises but smart regulations are required to help it deliver them.

China is preparing to end its $176 billion experiment with peer-to-peer lending. Alarmed by a surge in defaults, fraud and investor anger, Chinese authorities are planning to wind down small- and medium-sized P2P lending platforms nationwide, people with knowledge of the matter said. Regulators may also order the largest platforms to cap outstanding loans at current levels and encourage them to reduce lending over time, one of the people said, asking not to be identified discussing private deliberations. Shares of P2P platform operators sank in New York