P2P: China’s once-booming lending industry must close within two years, government notice says
- Once seen as an important credit mechanism, it has been rocked by pyramid-scheme scandals and absent bosses, sparking public anger as well as a government crackdown
- Only 427 existing peer-to-peer (P2P) firms were still operating by the end of October, down from 6,000 at their 2015 peak
All existing peer-to-peer lending platforms in China must become small loan providers within two years, a notice seen by Reuters on Wednesday showed, the latest official edict aimed at curbing the once-booming industry.
For firms that manage more than 5 billion yuan (US$711 million) in outstanding longer-maturity loans, the grace period can be extended by up to two years, according to the notice.
[It is] an active approach to resolve risks contained in the existing business of online lenders
In October, Chinese police began an investigation into financial technology firm 51 Credit Card for allegedly hiring debt collectors who used intimidation and harassment.
Ping An Insurance-backed Lufax also said it would exit the P2P market, one of the first signs that the tide was turning against China’s lenders.
The transition plan, which will begin at the end of November, is “an active approach to resolve risks contained in the existing business of online lenders,” the official notice announcing the measures said.