The peer-to-peer (P2P) industry in China could see the number of players decline by as much as 70 percent in 2019, reported Bloomberg.
The report, citing research firm Yingcan Group, reported that a crackdown by the China government caused the decline in peer-to-peer lenders. The P2P lending market in China has been rife with scams and controversy for some time now. The lack of regulation led to the country’s biggest Ponzi scheme, protests across cities in China and losses for thousands of people.
Bloomberg, citing people with knowledge of the matter, noted that Chinese authorities are gearing up to shut down small and medium-sized P2P lending platforms across the country. Prior to the recent activity on the part of the Chinese government, this type of lending was seen as one of the riskiest and least regulated areas of the financial markets. The lack of oversight resulted in huge growth, with loans kicking off in 2012 at next to nothing and growing to 1.22 trillion yuan by the end of 2017, reported Bloomberg.
According to Yingcan Group, by the end of 2019, there will only be 300 P2P lenders remaining. During 2018, the market research firm said the number of P2P lenders declined by 50 percent to 1,021. What’s more, no new companies have entered the market since August.
Bloomberg pointed to P2P lender Yidai as one example, as it is the latest lender to get out of the market. The company has around 32,000 lenders on its platform, with an outstanding principal balance of $581 million. The company expects to repay them over the course of five years. Yidai told Bloomberg that it was hurt by widespread panic among individual lenders and transaction values shrunk as a result, prompting defaults. The company, which has the backing of SoftBank China Venture Capital, also said some of its senior executives have been prevented from leaving the country.