Funds Sharing Regulation in the Context of the Sharing Economy: Understanding the Logic of China’s P
P2P lending regulation has been a hot topic across the world since the global financial crisis in 2008. A host of literature, from a wide variety of perspectives, spanning from securities regulations to banking regulation, is aimed at decoding the myth of P2P lending regulation. Our recent article published in Computer Law & Security Review, “Funds Sharing Regulation in the Context of the Sharing Economy: Understanding the Logic of China’s P2P Lending Regulation,” is part of that decoding effort. We contend that P2P lending is a sub-concept of the sharing economy. The peculiarity of P2P lending is that the shared resource is an amount of funds or money. What is meant by this is that P2P lending regulation should follow the fundamental principles of the sharing economy. Plus, to avoid too broad generality, the authors confine the research context to the practice of P2P lending in China, which is an economic powerhouse of the world. That’s to say P2P lending regulation in China, a representative regulating practice due to its importance amongst the developing economies, defines the research scope even though there are some comparative studies in the article.
We argue that “sharing economy” is an umbrella term that encompasses a wide range of digital platform-based activities that include P2P lending and other forms of internet-based lending. The core aim of the sharing economy is to leverage the utilization of idle capacity. P2P lending can not only be used to leverage small amounts of money on the lender’s side, but also be used to promote financial democracy and inclusion both on the lender and borrower’s sides. P2P lending regulation, therefore, should place an emphasis on the utilization of dead money and promotion of financial democracy.
The existing regulatory system for P2P lending in China, however, is built upon rules and regulations that have been designed solely with traditional brokers in mind. In this article, we contend that the rigid rules placed on lending platforms limited their ability to maintain their roles as brokers and, in turn, heavily endangered the commercial sustainability of P2P platforms, thereby harming the sharing economy’s openness and inclusivity. In addition, the fact that there is no limit on the amount a lender can invest poses a threat to the notions of leveraging idle money and financial inclusivity. The close-ended P2P lending regime in China would cause some chilling effects to financial innovation in the P2P lending industry, and in a wider sense, the rising FinTech sector. Financial regulators in China need to cope with some regulatory challenges in a flexible but pragmatic manner, and particularly make use of the benefits the sharing economy may bring to the Chinese economy. Presently, financial regulators in China often widen the scope of systemic risks to justify and rationalize their regulatory efforts and movements.
Yu Tao, Assistant Professor of Law, Eastsouth University of China Law
Shen Wei, KoGuan Distinguished Professor of Law, Shanghai Jiao Tong University Law School