Mei Xingbao, a member of the 12th National Committee of the Chinese People's Political Consultative Conference (CPPCC), speaks outside the meeting room of the ongoing annual session of China's top political advisory body in Beijing, on March 5, 2016. [China.org.cn]

Mei Xingbao, a member of the 12th National Committee of the Chinese People's Political Consultative Conference (CPPCC), has insisted that Internet finance should still be encouraged but, following exposure of several online scams last year, it should be more carefully guided and supervised.

The most famous example was Ezubao, the once all-powerful online lending firm launched in 2014 by Ding Ning, which touted itself as the country's largest peer-to-peer (P2P) platform. At the end of 2015, police in Shanghai, Beijing and the provinces of Jiangsu and Guangdong had either sealed, frozen or seized assets of Ezubao as part of a probe into the company suspected of cheating investors by promoting an illegal Ponzi Scheme.

It raised more than 50 billion yuan (US$7.69 billion) from some 900,000 investors countrywide through fraudulent investment projects.

The scandal shook investors' faith in peer-to-peer online finance, and many have started to withdraw from the new format.

"It should be made clear in the society that the strategic status of Internet finance is an intermediary organ," said Mei who was formerly of China Orient Asset Management Corporation. He is in Beijing attending the annual session of the 12th CPPCC National Committee, China's top political advisory body running until March 14. "It cannot take other people's money to carry out financial management, practice usury or engage in other extreme activities," he stressed.

However, "[online finance] is a new format. People should be more tolerant and give it more encouragement. I don't agree with being too critical. Of course, the relevant department should strengthen regulation and supervision, and the bottom line should be made clear. It's like a toddler who just learned how to walk -- you have to guide it to avert falls."

China has issued several regulations and rules to promote the healthy development of online finance and establish a supervisory framework. Mei said the relevant government department should also create more specific measures. He added that the system covering identification of as well as the credit system of Internet finance companies should also be improved.

"I can see the traditional financial institutions are also doing online business by adopting the modern concept and new technology," he said, "I think Internet startup entrepreneurs should also be better trained and educated. You have to understand the Internet as well as understanding finance, then you can start business. You cannot just build a website and make up some fashionable concepts and brag you will make money for investors."

Internet finance is still a high risk industry. According to statistics gathered by China's leading peer-to-peer news portal website wdzj.com, at least 1,407 peer-to-peer platforms have been deemed as problematic, among which 705 have closed down and their promoters have escaped. These are mostly small and private platforms.

Only about 2,600 platforms maintain normal operation. Although the shutdowns were stunning and the system of local registry of financial companies was tightened after scandals, it seems that investors are still trying to enter the business. As of January 2016, the online loan balance had reached 460 billion yuan (US$70.70 billion), 15 times more than early 2014, while the number of investors has reached 3.36 million.