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China's 'Two Sessions' 2016

Beijing seen as gaining ground in battle to curb illegal online lending to housing market

PUBLISHED : Tuesday, 15 March, 2016, 9:46pm
UPDATED : Tuesday, 15 March, 2016, 9:46pm

Beijing got off to a successful start in its efforts to stem illegal fund flows to the sizzling property market as 17 peer-to-peer (P2P) lending platforms suspended loans for down payments on property.

The suspensions come just two days after China’s central bank announced plans to crack down on illegal lending to homebuyers.

According to yingcanzixun.com, an online consultancy tracking operations of the mainland’s P2P companies, on Monday 17 companies halted lending to those who seek loans for down payments.

“A total 20 P2P players were offering loans for down payments,” an official with yingcanzixun.com said. “It was a huge withdrawal from the businesses.”

Zhou Xiaochuan, governor of the People’s Bank of China, told a press briefing on Saturday during the annual plenary session of the National People’s Congress that internet firms were barred from lending money to homebuyers for down payments.

The statement was viewed as a prelude to a nationwide inspection into some questionable P2P businesses as regulators blame some intermediary firms for lending practises that have inflated housing prices in top-tier cities.

Property prices in major cities such as Shanghai and Shenzhen soared last year as homebuyers bet on further price gains because of limited land supply.

As the central government cut interest rates, reduced mortgage down payments and embarked on monetary easing to help lower-tier cities soak up an excess supply of homes, the property market in China’s biggest cities bore the brunt of the home buying craze.

Home prices in shanghai climbed 30 per cent last year and continued to jump another 20 per cent in January this year, according to industry officials.

The authorities, battered by worries of a sudden collapse of the property market in the major cities, intensified supervision on real estate agents and financing firms, charging some of them with improperly rigging home prices to pocket illicit gains.

Some of the agents were found to have been directly involved in grey market financing businesses or to have assisted P2P providers in carrying out illegal lending practises, Lu Kehua, a vice minister of housing and urban-rural development, told a press conference yesterday.

P2P has increasingly become a threat to the mainland’s financial stability due to the lack of an efficient monitoring system.

A P2P provider is technically not allowed to take deposits from investors before lending the money to borrowers.

But hundreds of the online lending businesses are acting as shadow banks.

The mainland’s law-enforcement authorities including the police, the courts and prosecutors are now stepping up efforts to crack down on illegal private lending via the internet.

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