China’s Hunan province imposes total ban on P2P lenders after operators fail to comply with regulations
- Hunan’s move is likely to spur other provinces to control the wayward financial sector that has seen more than 5,970 platforms default or shut down as of September
China’s central Hunan province will ban all peer-to-peer (P2P) lenders, a local financial regulator said on Wednesday, in the most radical action taken by a provincial government against the industry notorious for frauds and defaults.
None of the 24 local P2P lending platform operators investigated by authorities complied with regulations, the Hunan Provincial Local Financial Supervision Administration said in a statement.
The lenders will be banned from conducting any new business, along with all other companies from other provinces that operate such business in Hunan – home of China’s founding father Mao Zedong, according to the statement.
The move is likely to prompt other provinces to take a tougher approach on disciplining the wayward industry, Liu Feng, chief economist at China Galaxy Securities, said.
“Putting a stop to the industry for now is a way to solve the current problem, because so many people have already been scammed. Laws and regulations have to be put in place first,” said Liu.
China’s P2P lenders, set out to connect borrowers with lenders directly and skip the middleman of traditional banks, have become an infamous example of the dark corners in the country’s financial system and shadow banking sector.