China crackdown on P2P lending leaves losses
China’s peer-to-peer (P2P) lending industry, which once numbered 6,000 companies, has shrunk to less than three dozen as the government tightened regulations, leaving billions in loans unpaid.
Now, Guo Shuqing, chairman of the Banking Regulatory Commission of China, the country’s main banking regulator, said investors are grappling with more than 800 billion yuan ($ 115 billion) in debt from the platforms. failing, Bloomberg News reported.
Regulators and law enforcement will do their best to recover the money, he told China Central Television on Friday (Aug. 14), according to the report.
At one point, the P2P industry issued over $ 150 billion in loans to 50 million investors. But the press service reported that the industry was plagued by fraud and defaults.
Two of the country’s largest P2P finance providers are Lufax (Lujiazui International Financial Asset Exchange Co. Ltd.) and Dianrong, and they have not been spared from the crackdown on financial risk by Xi Jinping, General Secretary of the Communist Party. Chinese.
While P2P platforms were touted as an innovative way to match savers with small borrowers, the market has experienced problems globally.
Earlier this year, PYMNTS announced that the Chinese P2P lending market is heading towards more turbulence in 2020, as more of its popular platforms are likely to be to close as the government tightens regulations.
The country’s P2P industry, a small part of global lending, was a source of credit for businesses and consumers who could not get loans from traditional Chinese banks.
“Rising regulatory and capital requirements for Chinese P2P lenders are expected to continue to put pressure on the sustainability of business models across the industry in 2020, leading to further contraction of the industry,” said Katie Chen, Director non-bank financial institutions at Fitch Ratings. at the time.
This week, Lufax was the latest company to file an initial public offering (IPO) in the United States as Chinese companies rush to become public prior to the coming into force of new strict federal disclosure rules.
This decision comes as the Secretary of the Treasury Steven mnuchin warned that Chinese companies wishing to be listed on US stock exchanges must comply with US auditing standards by the end of next year. This includes opening their audit files to US regulators, a move that would bring companies into conflict with secrecy laws in China.