“What the government should refrain from doing is to participate directly in industry development plans. It’s better to be a referee trying to make rules and let market institutions tap [blockchain’s] development potential,” said Tang Jianwei, a senior researcher with the Bank of Communications.

“The government should not blindly push [technology speculation fever], nor should it simply close them down when problems emerge.”

“For the next phase, [the government] will firmly push forward the clearance of risk within the industry, steadily and orderly resolving the risks from the existing platforms and taking multiple measures to support the orderly winding down or steady transformation [of peer-to-peer platforms] to protect the legitimate interests of investors and safeguard stability,” the task force statement said.

It was initially hoped that P2P platforms would help address the stubborn fundraising problems faced by small firms and consumers due to their lack of access to credit following reforms of the state-dominated financial system, but many platforms were found to be fraudulent, while others had difficulty collecting loan payments to repay their investors.

The People’s Bank of China called for P2P industry risks to be resolved by the first half of 2020, although the latest figures show that progress has been faster than anticipated. The number of online P2P platforms in China has fallen to just 427 at the end of October, down 59 per cent from the end of last year. The combined value of their outstanding loans plunged 49 per cent, while the number of borrowers dropped 55 per cent in the same period.

Many provinces are also shutting down all the P2P platforms within their jurisdictions. The municipality of Shanghai, the nation’s biggest city and its financial centre, announced last week that it would ban all future P2P lending, while the central province of Hunan announced in mid-October that it would close the last 24 locally registered online lending platforms.

“It would take a rather long time [to tackle the P2P risks] relying on market forces. Closing all of them is certainly the simplest way,” added Tang from the Bank of Communications, with local governments under pressure to comply with the requirements of Beijing’s financial de-risking campaign.

Chinese online gaming and fintech company Forgame Holdings said in an exchange filing on Monday that it has been unable to contact chairman and chief executive Li Luyi following media reports that Beijing police raid the P2P platform that he founded.

Forgame said it was still trying to verify the media reports, which claimed that some employees of Beijing Haitouhui had been arrested, according to the filing.

Iris Pang, chief Greater China economist of ING Bank, said that all P2P platforms should be closed eventually, given the high risk exposed in recent years, but that the clean-up would be a long process that could not be completed overnight.

But the fact that borrowers still use P2P platforms despite the well-publicised risks suggests that current government efforts to boost lending to small business and consumers does not yet meet their financing needs.

“A possible scenario would be that many have nowhere else to borrow except P2P platforms,” said Pang.

In a statement released on Friday, China’s central bank said that “continuing the financial de-risking campaign” and “firmly safeguarding the bottom line of no financial system risk” were key elements of its 2020 work agenda.

The government has been forced to recapitalise three regional banks in the past several months, and is keeping close watch over small rural banks whose solvency risk is widely deemed to be high.

“It’s fair to say it’s part of the risk, but it wouldn’t be fair to point all fingers at the P2P sector,” said Jasper Yip, a Hong Kong-based principal of global management consulting firm Oliver Wyman.

The rapid growth of internet financing, including P2P platforms, was driven by the expectations that they would fill the gap for the credit needed by small private businesses, which has historically been insufficient, he said.

Some P2P players have developed technology and understanding on different borrowers, investors, risk appetites and credit worthiness, which could be adopted by banks or other licensed financial institutions, according to Yip.

“We can actually construct an ecosystem where the capability [of the best P2P platforms] can be leveraged and funding could be given out in a more regulatory framework,” Yip added.