Regulations help resolve P2P plight
Lending sector expected to support small businesses: experts
In the shadows of many collapsing online peer-to-peer (P2P) lenders, Wu Hao, a Beijing-based investor, has been waiting anxiously in recent months to retrieve his savings.
“Withdrawing money from the Shanghai-based P2P platform I invested in was like squeezing toothpaste from a tube – I requested to take out all my 100,000 yuan ($14,500), but I was only able to get several hundred yuan each day,” Wu told the Global Times on Friday.
“I am desperate but I should feel lucky because the platform I invested in is still in operation despite its difficulties. However, I don’t know whether it can make it to the end,” Wu said with a bitter smile. “I have no choice but to wait and see.”
Other investors may not be so “lucky.” Other P2P firms such as lianbijr.com, txslicai.com.cn and yilongcaifu.com for example have been placed under investigation by police since June, meaning investors cannot get their money back at all.
In July, a total of 165 platforms reported problems, among which 65 percent had difficulties in investments withdrawal, while executives of 8.72 percent of those firms stole money and ran away, according to a report released by domestic industry website wdzj.com on August 1.
Accumulated transactions in the domestic P2P industry had reached 7.48 trillion yuan by the end of July, the report said.
And, a number of small P2P lenders have collapsed, while large platforms are suffering from negative market sentiment, industry insiders said.
“After many small P2P lenders collapsed, investors felt nervous and panicked and hurried to withdraw money, which made it hard for some large platforms to maintain their cash flows,” a product manager surnamed Liu who works for dianrong.com, a Shanghai-based P2P firm, told the Global Times on Thursday.
“The speed of debt assignment also became slow on our platform recently, as an increasing number of anxious investors requested to withdraw their investments,” Liu said.
The domestic P2P industry is therefore currently undergoing a major reshuffle and facing its biggest test yet, she said.
Tightened regulation
The domestic P2P industry experienced a burst of explosive growth around 2013, giving momentum to many platforms that did not have qualified operation capacities, causing issues such as lower asset qualities, said Yang Yifu, co-founder of Renrendai, one of the top marketplace lending companies in China.
Yang told the Global Times on Wednesday that rising risks in the P2P sector at the moment stem from Chinese authorities’ efforts to tighten regulation in the industry.
“Some platforms are finding it hard to continue running because they cannot meet regulators’ requirements.”
According to new regulations issued by Chinese authorities, platforms that do not comply with rules and have weak risk control will be cleared out of the industry, Yang noted.
On Wednesday, the China Banking and Insurance Regulatory Commission asked the country’s four Stateowned asset management companies to help address rising risks in the P2P sector, according to media reports.
A senior executive of one of these companies who did not want to be identified said their firm is now pondering over the best solutions for these risks, domestic news site tech.qq.com reported on Thursday.
On Friday, authorities issued a notice that contained unified standards to inspect the compliance of P2P firms, according to media reports.
Industrial outlook
China has about 73 million small and micro enterprises, accounting for 80 percent of all Chinese enterprises.
As such, they can only enjoy some limited financial resources, Yang said, noting that P2P lending aims to facilitate effective allocation of individual financial resources by providing an online platform that links borrowers and lenders.
A Shenzhen-based industry insider surnamed Du agreed, saying that traditional financial institutions cannot meet the increasing demand for fundraising from small and micro enterprises, and online lenders are the ones that can offer help.
“Online P2P lenders should function as a supplement to traditional financial institutions instead of their competitors, and this is their advantage and value,” said Yang.
In a bid to pursue sound growth, P2P platforms are expected to discover proper business patterns and set up higher industrial standards in the future, Yang said.