- Defaults in China’s peer-to-peer (P2P) lending market rose sharply in June, leaving many investors out of pocket.
- The FT reports the wealthy Chinese city of Hangzhou converted two sports stadiums into service centres to process complaints.
- Guidelines for regulatory oversight of the P2P lending industry were introduced in 2016, but some have yet to be implemented.
Cracks have begun to emerge China’s peer-to-peer lending market, with an increasing number of lending platforms collapsing as investors withdraw funds.
The Financial Times reports that around 150 lending platform have run into trouble in the seven weeks since the start of June, compared to 217 cases in total in 2017.
The results are based on findings from Online Lending Group (OLG), a research group which tracks the P2P industry.
It includes lending platforms on its “problem” list if they meet one of the following three criteria — investors are unable to withdraw money, the lending platform is the subject of a police investigation, or its owners have run away.
The P2P lending market matches investors with people looking for a loan, usually via an intermediary platform which facilitates the transaction.
OLG said there were 1,836 online lending platforms in China at the end of June, which matched loans between more than four million lenders and borrowers in that month alone.
And in Hangzhou — a wealthy Tier 2 city in China’s east — a significant number of investors have been left high and dry as many lending platforms collapsed.
According to the FT, local authorities were forced to convert two sporting stadiums into makeshift customer-service centres, where local government representatives fielded complaints from P2P investors.
Hangzhou is also the headquarters for the Chinese e-commerce giant Alibaba, and its subsidiary companies including Ant Financial.
A security guard at one stadium said many people had come to complain about a company called Zhuaqianmao — the direct translation of which is “money grab cat” — after lenders found they were unable to redeem their funds when the loan expired.
Analysts attributed the wave of P2P lending collapses to a combination of outright fraud and China’s ongoing deleveraging campaign, which includes crackdowns on opaque shadow banking structures.
Research by a Chinese government-backed think tank last month warned of a looming “financial panic” which could escalate in the period ahead.
The P2P industry has been in the sights of Chinese authorities for some time, but the actual implementation of regulatory oversight has faced multiple delays.
New measures were introduced in 2016 which banned risky practices such as using new fund inflows to pay out obligations on existing loans.
A new filing requirement was also flagged in the same year, but as at April 2018 regulators had scrapped the measure, pending further consultation about a unified set of P2P lending standards.
You can read more in the Financial Times here.
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