Another Chinese online lender is exiting the market amid regulatory clamp down. Guangdong-based Hongling Capital, one of the oldest and largest peer-to-peer lenders in China, is calling it quits. CEO Zhou Shiping made the announcement Saturday in a post (in Chinese) on the company’s online community titled “Though we’re winding-up, this is not goodbye!”
To those who have followed the rise and fall of China’s online lending industry over the last two years, the firm’s announcement didn’t come as a shock. Hongling Capital first declared its intention to exit the online lending market back in Jul. 2017 amid the government-led campaign to crackdown on fraudulent financing activities and lower risk in the financial system. However, regulators then suggested the company, instead of throw in the towel, work to comply with business practice standards so to ensure the stability of the industry.
According to the proposed timeline indicated in Zhou’s post, the firm will cut its the outstanding loan size by RMB 5 billion in 2019, then by RMB 8 billion in 2020, and eventually shut down its online lending operation by the end of 2021.
Hongling Holdings’ other fintech platform Tzbao.com, which provides services such as equity investment and loan financing for small and medium-sized enterprises (SMEs), will transition to offline private fundraising. However, its other online lending platform Yiqiandai.com will remain in operation and will shift its focus to serving real estate SMEs.
Founded in 2009, Hongling Capital was the largest P2P lending in the Guangdong region and has a cumulative loan of over RMB 450 billion ($ 67 billion). In February, outstanding loan of Hongling Capital was RMB 20.25 billion ($3 billion) according to wdzj.com.
Hongling Capital focused on the “big loan model,” which is one of the reasons that got the company into deep trouble. Many of these large-scale projects, sometimes exceeding RMB 100 million, were rejected by traditional financial institutions before landing in Hongling’s lap, putting the company in a risky position.
China’s P2P lending industry has been in crisis mode ever since the government began tightening regulations around riskier forms of financing in 2016. Many smaller players have collapsed as a result of the ongoing industry consolidation, in which the number of platforms is projected to drop by as much as 70% this year, according to Bloomberg.
Other more established platforms have not been spared from the regulatory crackdown. Dianrong, another major P2P lender that recently was found to be knee deep in liquidation issues has been scaling down parts of its non-money making businesses.
The New York-listed Rong360, which provides information services for loans as well as other financial services such as P2P loans, recently took down its app after being slammed by Chinese state media outlet CCTV during the broadcast this year’s consumer rights show on Mar. 15.