China’s Earliest P2P Lending Platform Opt Out in 3 Years to Comply With Regulation
30 July, Shenzhen-Hongling Capital, the earliest and also one of the biggest p2p lending platform in China, announced that platoform would exit p2p lending market in 3 years. Hongling Capital was founded in 2009 and over 270 billion CNY has been traded since then. As the pioneer in the internet p2p lending market, Hongling is a beacon to thousands of similar p2p lending websites. The news came as shocking as Bitcoin exchanges in China are more or less under the rule of same regulatory authorities.
Hongling started as a p2p lending platform for small investors and small enterprises who were capital hungry but failed to get loans from traditional banking system. Hightlights of Hongling is the “guarantee of principal and interest”. If bad loans occurred, the platform would make advance payment to investors. But the risk and the return of this model is not proportional. Therefore in 2014, the platform introduced “big loan” model with cooperation with banks. “Big Loan” refers to the projects with financing target over 100 million CNY.
According to the “Interim Measures for the Management of Business Activities of Internet Lending Information Agencies”, which was released on August 24, 2016 by the CBRC along with other institutions, it is stipulated that:
“on a single platform, the personal borrowing balance shall not exceed 200,000, and the enterprise shall not exceed one million “
” p2p platform must not provide vouching or principal and interest warranty for investors”.
The two pillars that Hongling Capital has been relying on have crossed the red lines of the regulatory authorities.
These regulations are also applicable to Bitcoin exchange in China as they are categorized as internet finance platform.
And there are more restrictions to come.
In early July, People’s Bank of China and other 17 regulatory authorities jointly issued the “Further notice on the rectification work of Internet financial risk” (hereinafter referred to as the “Notice”). The “notice” specifies the next step in the rectification work and a detailed schedule.
The “Notice” states that the rectification work should be completed by the end of June 2018. The rectification period can be extended up to 2 years for individual practitioners that are particularly complicated after approval by the provincial government.
“Effective measures must be taken to ensure that the number of internet financial entities and the scale of business operation are cut down.”
During the rectification period, the existing non-compliance business must be gradually wiped out. Once new non-compliant business is detected, the local authority must immediately stop and deal with such behavior.
Bitcoin exchanges in China have just gone through a major rectification since early 2017. Although none has been shut down in the regulatory storm, the exchanges will face more requirements in the future.