China’s Online Lending Crackdown May See 70% of Businesses Close – Bloomberg
What happened: As few as 300 peer-to-peer (P2P) lending platforms may survive a government crackdown on risky lending platforms that led to a 50% drop in the number of operators in 2018. According to Shanghai-based research firm Yingcan Group, there have been no new entrants to the sector since August. SoftBank-backed Yidai is the latest company to exit the market. The firm has 32,000 lenders who are owed RMB 4 billion (around $580 million) and expects to pay them back in the next five years.
Why it’s important: China’s P2P lending industry shrunk significantly in 2018. Following increasing default rates, the government stepped in to regulate the sector. Authorities are cracking down on small- and medium-sized lending platforms. The market in some cases led to lenders losing their life-savings as well as protests in various cities around the country. According to financial services firm Rong 360, there were more than 800 P2P loan platforms in 2018 that were deemed to be problematic, where users couldn’t withdraw their money between February and November.