Shanghai-based Dianrong, one of China’s largest peer-to-peer (P2P) lenders, is blaming the government for its recent problems, which includes shutting down 60 of its 90 offline stores and laying off around 2,000 employees.
“Some people wonder why Dianrong’s growth has slowed in the past two years. It was not because we did not want to or could not grow. It was because we were told not to grow,” said Dianrong Co-founder Guo Yuhang, according to Reuters. “While the industry has expanded quickly to a large and complex scale over the years, regulatory directions keep changing and different regions have different rules.”
The company — co-founded by Soul Htite, who is also responsible for U.S. online lender LendingClub — raised $220 million in funding in 2017, led by Singapore sovereign fund GIC, as well as CMIG Leasing and South Korean fund manager Simone Investment Managers. However, though the company expanded quickly in 2017 and 2018, Beijing’s crackdown on certain lending practices forced Dianrong to decline in the second half of 2018. In addition, Guo noted that many of the businesses that started as part of Dianrong’s expansion have now become “heavy burdens with unbearable high costs” due to the regulations.
As a result, the company’s outstanding transaction volume declined to ¥10 billion ($1.49 billion USD) from ¥14 billion, Guo said. Furthermore, some employees went unpaid for two months. While China’s central bank did not respond to Guo’s comments, it announced earlier this month that it is planning to develop a system of rules to regulate FinTech in the country.
“We hope regulators can give the industry a clear and definite timetable, and give guidance and a ray of hope for companies that stick to compliance,” Guo said. “The situation of the industry shows that the one-size-fits-all rule will definitely curb innovative businesses.”