China's internet finance sector has encountered numerous obstacles in its short history. But its problems have been part of a broad diversification of the financial sector that has already made a contribution to the real economy. Internet financing has played a crucial role in stimulating consumption and private investment. It has also helped ease the financing problems of medium and small size enterprises,which have long complained of their inability to win funding from the traditional banking system. China's online lending sector has been praised by regulators for its strategic significance in improving China's financial system,filling the credit gap left by banks,and supporting enterprises push ahead with much-needed innovation. China's internet finance sector will also spur new developments along with the reforms planned by China's economic strategists.

Consolidation

The number of financing platforms,which collect funds from investors,reached a peak of 2,612 in the end of 2015,but the growth phase quickly came to a halt. By the end of June 2016,246 of these platforms had shut down. In 2016,the number of platforms which stopped working declined month after month,and the closures topped 30 in one month alone. Many of those still in business have been struggling. According to some estimates,only 10% of the problem platforms had ceased operation in 2015 and the figure reached 50% at the end of June 2016.

Some of the better performing platforms,such as Credit Ease,Firstp2p.com,Lu.com,Diaorong.com,and Ppdai.com,were thriving during the hard times as others fell by the wayside. Dianrong.com,for example,chose to launch a campaign in major cities such as Beijing,Shanghai and Guangzhou highlighting its reliability as many firms withdrew from the sector.