P2P platform operators urged to exit as regulators mull next clampdown phase

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Chinese internet financial risk and online lending regulators may be intensifying efforts to clamp down on the online peer-to-peer (P2P) lending space after a recent meeting to discuss progress in regulating the sector, according to the state-backed news publication Securities Times (in Chinese).

Why it matters: China’s P2P lending crackdown has shuttered thousands of lending operators and heavily crimped operations for even prominent players like Lufax and Dianrong. The meeting suggests that surviving platforms may face even tougher scrutiny with the official debut of the nationwide monitoring system scheduled for next year.

Details: Online lending platforms that have not registered with the national monitoring system will be urged to exit and those registered in the system will face tightened supervision.

  • As of the end of October, there were 427 platforms registered with the monitoring system, a 59% drop from the end of 2018. Outstanding loans also fell 49% from the previous year during the same time frame.
  • The meeting, attended by representatives from central and regional governments, set a clearer direction for the clean-up efforts, which has been ongoing for three years. The next phase will focus on reducing risks and assisting non-compliant lending operations with exiting or transitioning out of the space, according to Securities Times. Protecting investor rights and maintaining the stability of the regional economy will also be an emphasis.

Context: Regulators have been implementing measures to further consolidate the P2P lending sector which was plagued by fraud and risky financial practices.

  • The country’s central bank recently announced plans to include P2P lending in its credit reference system.
  • In October, provincial governments including Hunan and Shandong ordered non-compliant online lenders to exit the space, a move expected to virtually wipe out all operators in the region.
  • Major financial centers in the country are following suit. Bloomberg reported last week that more than 40 online P2P lenders in Shanghai were notified by authorities to scale down their businesses and exit the market.