The number of peer-to-peer lenders in China is projected to decline greatly to around 50 from more than 1,500 during the course of the next year.
The Financial Times, citing Greg Gibb — chief executive of Lufax, one of the biggest peer-to-peer lenders in China — reported that regulators are gearing up to issue licenses during the next year to companies that meet very strict criteria. Gibb told the Financial Times that very few of the current peer-to-peer lenders will make the cut with the new licenses. Several other industry executives told the Financial Times that the new regulations will push most of the companies out of the market. The number of peer-to-peer lenders that are expected to survive the overhaul in oversight range from a few hundred to under 50, reported the Financial Times.
The peer-to-peer lending industry in China, which is a $120 billion industry, has been facing a regulatory crackdown after years of light oversight. As part of the reforms, the executives of peer-to-peer lenders would be prevented from leaving the country when the business goes under. In recent months investors, many regular Chinese citizens, have taken to the streets to hold protests about their losses on these platforms and executives have been barred from leaving the country, noted the Financial Times, citing several people familiar with the matter. Investors who lost money contend the government didn’t do enough to regulate the online lenders.
“Identifying those 50 to 100 companies could take place over the next 12 months,” Gibb said of the official licensing process. The report, citing WDZJ.com, an industry intelligence company, reported there are around 1,530 peer-to-peer lenders operating in China, but that capital has been leaving the market at a record-setting pace since June. Total outstanding loans have fallen from Rmb1.02tn to Rmb853.6bn from June through September. From the beginning of June through most of August Reuters reported 243 P2P companies or more have gone under.