The Chinese government has approved a plan to clean up the country’s online financial sector, according to people with direct knowledge of the matter, including rules to limit the activities of peer-to-peer (P2P) lending firms, the source of recent fraud scandals.
The plan, drafted by China’s central bank, follows a video-conference in the middle of last month with 14 ministries and regulators organized by the State Council, the country’s Cabinet, which approved the plan document seen by the sources.
It outlines stricter rules for P2P platforms, where lending quadrupled last year to 440 billion yuan (US$67 billion), according to Citigroup research, forbidding them from holding clients’ capital in-house.
Instead, client funds must be deposited with a qualified third-party banking institution and kept separate from a P2P platform’s own corporate funds. Firms must also set up “firewalls” to manage transactions with affiliates.
“The online finance sector has entered a tough period this year,” Wang Zhijian (王志堅), chief executive officer of FuYin (福銀), a Shanghai-based P2P platform, said at a financial forum on Friday.
“Good platforms welcome government regulation for a simple reason: without good rules, bad players push out good players,” said Wang, adding that a lack of regulation forced all platforms into unfair competition.
In February, authorities arrested 21 officials of Ezubao (e租寶), once China’s biggest P2P lending platform, which collected US$7.6 billion inside two years from more than 900,000 investors.
It used savvy marketing, authorities said, to fund “a complete Ponzi scheme” that used investor funds to support a lavish lifestyle for company executives.
Last month, police arrested 21 executives at Zhongjin Capital Management Co (中晉資產管理) — a high-profile Shanghai-based platform that promised retail investors double-digit returns for short-term projects — accusing them of “illegal fundraising.”
“These big cases are neither online finance nor P2P. They are frauds covered in the name of P2P and online finance,” said Wang Sicong (王思聰), chairman of P2P platform eLoan (翼龍貸).
He said eLoan’s business dropped by a third after the Ezubao fraud was exposed.
Internet lending has made headlines not just in China recently, with the US Department of Justice investigating San Francisco-based Lending Club Corp, which has admitted falsifying documentation when selling a package of loans.
China’s Cabinet is urging the 14 ministries to share information to clean up the online finance sector, the sources said.
The government is also calling for the establishment of a centralized registration system for Internet financial products and a unified platform for Internet bank accounts.
The plan restricts what online financial platforms can do without a license — from raising cash to fund real-estate projects to engaging in financial services such as asset management. It also creates additional responsibilities, such as a requirement to match a client’s risk profile to the investment products they sell.
The plan also forbids false advertising of financial products, and prohibits non-financial companies from registering names including “finance,” “asset management,” “P2P,” “payments,” “fund” and “trading exchange.”
An inter-government body led by the central bank is also being set up, with representatives from the banking, securities and insurance regulators, along with the State Administration for Industry and Commerce and the Ministry of Housing and Urban-Rural Development.
The plan calls for those ministries and departments to complete their field investigations by July and finish a sector-wide clean-up by November. The Cabinet intends to issue a report by March next year.
China’s central bank and State Council did not immediately respond to requests for comment.
The contents of the plan document also appeared on social media in China on Friday, and in Chinese media earlier.
FIVE NEW FABS: An acquisition of Siltronic would boost GlobalWafers’ market share from 17 to 30 percent, easily surpassing Japanese rival Sumco’s 25 percent GlobalWafers Inc (環球晶圓) yesterday said it is in final talks to acquire Germany-based Siltronic AG in a 3.75 billion euro (US$4.5 billion) deal, which might help it compete with its closest rival Sumco Corp of Japan. The acquisition would be the fifth for GlobalWafers since 2008, as it has grown to become the world’s No. 3 supplier of silicon wafers through such deals. GlobalWafers, which has a 17 percent market share, would see its market position greatly elevated to 30 percent when combined with Siltronic’s 13 percent, according to a presentation Siltronic gave to its investors at a quarterly conference in August. Sumco
With the speed cryptocurrency is emerging as the millennial generation’s alternative asset of choice in India, it is hard to imagine that just two years ago a couple of blockchain pioneers were briefly in police custody. Sathvik Vishwanath and Harish BV, cofounders of a then five-year-old start-up, were arrested in late 2018. No, they had not pulled off a shady initial coin offering. Their “crime” was that they put up a kiosk in a mall in Bangalore where customers could swap bitcoin, ether or ripple for cash or vice versa. That was the whole point of unocoin, their crypto token exchange.
CONCERNS: The bank would act if it noticed currency speculation, the governor said, but he did not comment on a likely trajectory of the NT dollar against the greenback The central bank would intervene in the market whenever necessary to help stabilize the New Taiwan dollar, central bank Governor Yang Chin-long (楊金龍) said yesterday, adding that it is concerned Taiwan might be placed on the US watchlist for currency manipulation. The Control Yuan recently sent letter inquiring about the central bank’s market regulation efforts, Yang told a meeting of the legislature’s Finance Committee on the NT dollar’s appreciation and property price hikes. “It is the central bank’s top responsibility to stabilize foreign exchanges,” he said. The central bank has often stepped in toward the end of trading sessions to moderate the NT
Qualcomm Inc expects global shipments of 5G smartphones to more than double to between 450 million and 550 million units next year from this year, driven by increasing 5G network deployment worldwide and broader adoption of 5G technology beyond smartphones, a company executive told a virtual news conference yesterday. The San Diego-based company said that more than five times more telecoms have commercially launched 5G services in the first 18 months of the 5G era, compared with wireless technology transitions to previous generations. The momentum is to pick up speed in 2022, with the shipment volume of 5G-ready smartphones projected to reach