China is the world’s second largest economy by GDP, and was for a generation by far its fastest growing economy. For nearly thirty years, output grew at an astonishing 10% per year on average. Since 2014, however, growth rates have begun to stall, and in the last two years the government have made significant moves to reduce spending and gain control over the extremely high levels of credit and debt in the country.
The result has been a liquidity crunch which has in recent months threatened to reach crisis levels, and has caused many of the country’s traditional peer-to-peer (P2P) lending platforms to break down. This week a report from Beijing media outlet Sohu has identified a new business model seeking to address the issue: P2P cryptocurrency-based lending platforms.
The new model aims to solve two issues at once: the liquidity crisis which prevents individuals and businesses from securing credit through the traditional channels, and the bear market in crypto which ties up individuals’ capital. Put simply, crypto investors can borrow fiat against their Bitcoin and Ethereum, and lenders say they can expect to secure 50-70% of the assets’ value depending on the markets. According to the Sohu report, at least twenty cryptocurrency P2P start-ups have emerged across the country.
The report presents a welcome counterpoint to the recent flood of bearish news out of China. Just in the last few weeks the country has blocked 120 foreign crypto exchanges, censored crypto and blockchain-related news from social media giant WeChat, and banned hotels from hosting crypto events.
