Beijing to tighten rules on P2P lenders amid growing default risks

Many peer-to-peer lenders on the mainland would be hit as regulators warned of rising default risks and were ready to step up efforts to crack down on illegal fundraising.

Instead of acting as an intermediary for lenders and borrowers, most of these operations were engaged in crowd funding or deposit taking, which would likely be regulated, analysts said.

"There isn't any industry standard yet, so internet finance firms are operating in a legal grey area, but most of them will likely be affected by the new rules," said Yang Tao, a researcher at the Institute of Finance and Banking at the Chinese Academy of Social Sciences.

The China Banking Regulatory Commission was leading the effort to draft detailed rules governing the activities of these firms, said Liu Zhangjun, a director at the commission in charge or combating illegal fundraising.

"More than 1,000 peer-to-peer lending platforms operate on the mainland now, and those that engage in crowd funding aren't in the minority," Yang said.

Under current laws, crowdfunding operations that involve giving returns in bonus, interest or shares carry regulatory risks.