China is regulating micro loans on the internet, with a high-level Chinese government agency issuing a notice urging provincial governments to halt approval of new web-based online lenders.
According to news from Reuters, citing various sources, the regulatory body which is in charge of reducing risks in the online finance sector (which is currently exploding in China), also told regulators that they should restrict the granting of new approvals of micro loan firms that want to lend money across China.
The increased regulation, noted Reuters, put pressure on Qudian, the Chinese online lender that is backed by Alibaba and its affiliate Ant Financial. Qudian, which reached profitability in 2016, runs a website that enables college students and young workers to purchase laptops, smartphones and consumer electronic gadgets on a monthly installment basis. Meanwhile, China Commercial Credit, Jianpu Technology and China Rapid Finance saw a dip in their stock prices on news of the increase in regulation by the Chinese government.
Internet micro loan companies have been performing well during the course of the last year, thanks in part to a lack of stringent government rules. The firms are lending to consumers in China that have been turned down by Chinese banks. However, interest rates on these tiny loans can be very high — something borrowers don’t realize.
Earlier in October, state-backed media entity Securities Times reported that new Chinese laws would take effect in the next six months to control the activities of more online micro credit companies. The news service noted that in 2017, the People’s Bank of China added wealth management products to its list of regulated items as part of an effort to control risks to the country’s financial system.
In addition to stepping up oversight of consumer lending firms, China is also increasing its regulation of cryptocurrency. In recent weeks, it has banned both ICOs and bitcoin exchanges amid a clampdown on digital currency, which can be volatile but has been making people lots of money.