What China’s clampdown on online microlending means for fintech giant Ant Group
- CBIRC and PBOC issued draft rules for online microlenders on Monday, days before Ant makes its public markets debut
- Rules could crimp profits of online lending platforms, analysts say
China’s financial regulators have drafted rules that clamp down on a booming microlending market in the world’s second-largest economy, a move that could curb the profits of the country’s fintech giants and stem the flow of funds to small businesses.
“This is a strong regulatory tightening signal,” Shujin Chen and Alfred He, equity analysts at brokerage Jefferies, said in a report for investors.
The draft rules could dam liquidity flowing to parts of the economy that need it the most. China is recovering from the economic pain inflicted by coronavirus-related lockdowns this year, but small business owners and individuals are still struggling to obtain loans from traditional banks.
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While regulators are seeking to reduce debt in the financial system, the draft rules could also crimp microlenders’ profits by piling on compliance costs, slashing the size of individual loans and requiring online platforms to contribute a larger share of loans instead of relying on traditional lenders’ balance sheets, analysts said.