Peer-to-peer (P2P) lending platforms have shuttered in China’s Hebei province as regulators aim to get rid of deception and inefficiency in the sector, South China Morning Post (SCMP) reported on Friday (Dec. 13).
Of the 35 P2P platforms in the Hebei province region applying to continue their business, none reached the eligibility regulations, according to a statement from the Hebei government, SCMP said.
China has ramped up efforts to crack down on the sector, which is seen as eroding the country’s financial system.
P2P companies will be seen as “conducting illegal businesses” and banned accordingly if they didn’t go through the appropriate checks. Some 93 companies have already left the market.
Hebei has become the second province in China to outlaw the P2P business after Hunan, which imposed the ban in October.
About 6,000 P2P platforms have missed payments to investors and “suddenly suspended operations.” Investments totaling over ¥214 billion ($30.7 billion) were jeopardized.
In November, China ordered the reorganization of P2P firms as small loan lenders within two years, a notice issued by China’s Internet Financial Risk Special Rectification Work Leadership Team Office, SCMP said.
The edict said that outstanding loans have to be cleared in less than a year prior to the reorganization. Outstanding loans over ¥5 billion could get an extension of a maximum of two years.
Just 427 P2P lenders were still viable at the end of October, compared with a peak of 6,000 in 2015, according to the latest data from China Banking and Insurance Regulatory Commission.
By the end of October, Shanghai regulators ordered more than 40 P2P lenders to get ready to close. China’s P2P sector emerged during a wave of deregulation and had operated with little oversight. It was intended to provide loans to smaller borrowers and to give savers access to double-digit yields.