China begins cracking down on online micro-lenders

BEIJING: China took steps to rein in the rapidly growing and lightly regulated market for online micro-lenders in the government’s latest crackdown on Internet finance, sending shares of United States-listed Chinese financial firms into a tailspin.

A top-level Chinese government body issued an urgent notice on Tuesday to provincial governments urging them to suspend regulatory approval for the setting up of new Internet microlenders, say sources.

The multi-department body, tasked by the central government to rein in risks in the Internet finance sector, also told local regulators to restrict granting of new approvals for microloan firms to conduct lending across regions, according to sources.

Beijing started a relentless crackdown on the Internet finance sector last year, issuing guidelines and rules to regulate online financial activity following a spate of scandals, frauds and high-profile peer-to-peer (P2P) failures.

The clean-up has led to the creation of a top-level body comprising government entities that include the central bank and banking regulators.

The crackdown on microlenders comes as authorities warn about rising household debt, which includes mortgages and consumer loans.

Unsecured consumer lending via Chinese online platforms more than tripled last year to almost US$140 billion (RM575.64 billion), according to a recent report by the Cambridge Centre for Alternative Finance.

On Tuesday, shares in Chinese online lender Qudian sank nearly 20 per cent on Nasdaq, before recovering some ground to end 3.8 per cent lower.

Qudian operates a website that allows college students and young white-collar workers to buy laptops, smartphones and other consumer electronics in monthly installments.

Shares of China Commercial Credit Inc ended down 8.8 per cent and PPDAI Group slumped 14 per cent. Reuters