China has started a new round of checks on thousands of peer-to-peer (P2P) lending Web sites, a document obtained by Bloomberg News showed, as authorities continue their efforts to clean up the industry.
Regulators are trying to steadily resolve risks by guiding some firms to exit the business, an Aug. 13 document issued by the Chinese Internet Lending Financial Risk Management Working Leadership Group and cosigned by the China Banking and Insurance Regulatory Commission said.
The checks, which include self-review by peer-to-peer firms, as well as inspections by local financial regulators, must be completed by the end of the year, the document said.
“This is good for the industry because there’s been a lack of regulation,” Chen Shujin (陳姝瑾), a financial analyst at Huatai Securities Co (華泰證券) in Hong Kong, said by telephone. “The policy direction now gives more certainty to the P2P industry that the good ones will be able to survive.”
China’s clampdown on financial risk has weighed on P2P platforms for the past two years, but the pressure on the US$139 billion industry has intensified over the past few months.
The platforms, which facilitate loans from mostly individual investors to borrowers willing to pay high rates of interest, have about 50 million registered users, official figures showed.
At least 223 platforms failed last month — including platforms that have halted operations or come under police investigation —taking total failures to more than 4,500, according to Shanghai-based Yingcan Group (盈燦集團).
Outstanding loans dropped 26 percent to 956 billion yuan (US$139.3 billion) last month from 1.3 trillion yuan in June, Yingcan data showed.
Those complying with the rules are to be allowed to connect to a national product and information registration system, and some firms will then be permitted to apply for official business registration after a successful trial run, the documents said.
Peer-to-peer lending is to be subject to 108 queries, including whether platforms raised money from investors for their own use, rather than investing for other projects or lending to borrowers; offered implicit guarantees on product principal and return; provided illegal loans to controlling shareholders or affiliates; and if they distributed products by other financial institutions, they showed.
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