Fri, Aug 26, 2016 page11

• Beijing imposes limits for borrowing from P2P sites

  CRACKDOWN: The new P2P lending limits are part of a broader tightening to curb risks and cut leverages, and will likely kill off many P2P companies, one observer said

  • Bloomberg
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  The Chinese government on Wednesday imposed limits on lending by peer-to-peer (P2P) platforms to individuals and companies in an effort to curb risks in one part of the loosely regulated shadow-banking sector.

  The China Banking Regulatory Commission said an individual can borrow as much as 1 million yuan (US$150,245) from P2P sites, including a maximum of 200,000 yuan per site.

  Corporate borrowers are capped at five times those levels. China’s authorities are concerned about defaults and fraud among the nation’s more than 2,300 online lenders, the commission said.

  “The P2P crackdown is part of a broad tightening to curb risks and cut leverage in banking, insurance and brokerage sectors, as regulators deal with problems from last year’s loosening,” said Dai Ming (戴明), a fund manager at Hengsheng Asset Management Co (恆盛資產管理) in Shanghai.

  “The crackdown will likely kill 70 to 80 percent of the P2P companies,” he said.

  The same day, the People’s Bank of China sold 50 billion yuan of 14-day reverse-repurchase agreements, its first offering of anything with a tenor other than seven days since February, spurring speculation officials want to curb leverage in the bond market by making it less profitable for investors borrowing to buy 10-year debt, according to Oversea-Chinese Banking Corp (華僑銀行) and Haitong Securities Co (海通證券). For Natixis SA though, the move should not be interpreted as anything other than an effort to build out a short-term yield curve.

  The monetary authority continued its cash injections yesterday, offering 140 billion yuan of seven-day repos and 80 billion yuan of 14-day contracts, according to two traders at primary dealers required to bid at the auctions. Accounting for maturing repos, the operations added a net 170 billion yuan to the banking system.

  Market News International yesterday said the People’s Bank of China (PBOC) is trying to add long-term money to the market, adding that it considers maturities of more than 14 days if needed. The central bank met with lenders on liquidity management and is trying to reduce maturity mismatches, MNI said, without citing any sources.

  The lack of an official statement from China’s central bank is at odds with a recent drive to boost market communication.

  The PBOC has issued a relative flurry of statements this month, saying on Aug. 15 that investors must not focus too much on short-term concerns. Days earlier, after data showed the weakest increase in credit in two years, PBOC research bureau chief economist Ma Jun (馬駿) said that the slump has not hurt growth.

  “Investors are waiting for further signals from the central bank,” First Capital Securities Co (第一創業證券) said.

  “It seems the PBOC wants to warn investors not to get excessively leveraged, but on the other hand, it wants to keep the measure moderate to avoid panicking the market,” it said.

  In the past 12 months, China has seen markets from stocks to commodities and property overheat as the central bank eased monetary policy, while weaker-than-estimated data suggest the extra liquidity is failing to benefit the broader economy.

  Regulators might impose curbs on lending to developers and homebuyers in an effort to damp prices, said the people who asked not to be identified because the plans have not been publicly disclosed.

  Regulators will talk about increasing down payments to 50 percent for first-time residential buyers, and to 70 percent for buyers with previous borrowing records, according to the people, who said the plans have not been finalized.
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