China is making rapid inroads towards reducing peer-to-peer lending risk to meet the 2020 target deadline but expects to keep alive the few remaining with strong fintech expertise and shareholder support.
A task force created in response to a series of online lending platform collapses shared in a statement its plans for the coming phase.
«For the next phase, [the government] will firmly push forward the clearance of risk within the industry, steadily and orderly resolving the risks from the existing platforms and taking multiple measures to support the orderly winding down or steady transformation [of peer-to-peer platforms] to protect the legitimate interests of investors and safeguard stability,» a statement said, according to a state media report.
Whilst most P2P platforms will be shut down, those with fintech expertise and shareholder support will be converted into small lenders. A select few with strong capital bases and are fully compliant will be converted into consumer lenders.
Rapid Shutdown
Recent data showed that the number of online P2P platforms plummeted to just 427 – a 59 percent drop compared to 2018-end. The total outstanding loan value and the number of borrowers also dropped correspondingly by 49 percent and 55 percent, respectively.
Hope for P2P platforms to reach small firms and consumers that lacked access to major state-owned credit providers were dashed as many players were found to be running Ponzi schemes and other fraudulent operations. In turn, authorities are now rapidly reining in on the risks created by the industry, especially in the midst of an ongoing trade war. Many provinces are shutting down P2P platforms in various fashion including Shanghai, which issued a complete ban against all future P2P lending.
