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Peer-to-peer (P2P) lending is an important source of funding for businesses and individuals. Today, China represents the largest P2P lending market in the world, despite having no clear regulatory policies. In 2015, some 34.5% of China’s P2P lending platforms experienced serious problems, including owners vanishing, fraud, and difficulties with cash withdrawal. So, the proper regulation of the P2P lending industry is both important and urgent. P2P lending has certain distinctive advantages and also has associated risks. When combined with the economic and regulatory environment, the risk involved in China’s P2P lending becomes more complicated. Without a comprehensive credit system, China’s P2P lending platforms started to provide guarantees to investors, which actually violate the related laws on guarantees. More importantly, the lending platforms’ role changed from information intermediaries to credit intermediaries, causing regulatory arbitrage. Platforms engage in quasibanking businesses but are not restricted by relevant requirements of banks. To improve P2P lending regulation, academics in China began to focus on international P2P lending regulatory experience as a reference point for reform. Some have suggested that China should merge all existing regulatory entities to form a unified regulator like the Financial Conduct Authority (FCA). However, to reduce regulatory arbitrage, functional regulation is an appropriate direction for reform, although it does not necessarily require the adoption of a single-regulator model. Multiple regulatory entities can also oversee P2P lending, depending on the activities that fall within their regulatory authority. In order to improve China’s P2P lending regulatory system, the government should adopt an encouraging and supportive attitude towards this emerging industry, considering its important function in providing financial resources for fundthirsty smalland medium-sized enterprises and individuals. Functional regulatory theory should be adopted to ensure that similar financial services receive the same regulation, as well as to reduce regulatory arbitrage and unfair competition.

IMPROVING CHINA’S P2P LENDING REGULATORY SYSTEM: AN EXAMINATION OF INTERNATIONAL REGULATORY EXPERIENCE