Tougher rules set to govern P2P lending
Print Edition
CHINA’S P2P (peer-to-peer) lending will soon face stricter regulations in an effort to clean up the business after a string of frauds and defaults.
P2P lending platforms have sprung up all over the Internet and loans are mounting, but some of these platforms are involved in illegal fundraising or have had trouble servicing payments, said Liu Zhangjun, director general of the Interagency Illegal Funds Taskforce.
The business has no thresholds, standards or regulations making illegal borrowing easy. In many cases economic crimes are systemic.
Han Hao, head of the Ministry of Public Security’s economic crimes unit, said P2P lending is a typical front for illegal fundraising, a crime that can lead to years, or even life, in prison.
To deal with these problems, the China Banking Regulatory Commission will lead a campaign to regulate P2P lending.
“Work has already begun,” Liu said.
In response to the government’s tougher stance, Baidu announced this week it would clean up P2P lending platforms on its website, a major marketing channel for many of them.
The announcement came after P2P lending platform Wangwangdai, which sold financial products on Baidu, seemingly disappeared this month with a huge amount of money raised from investors.
Dozens of other platforms are being investigated for alleged illegal activities.
The disappearance of Wangwangdai brought Baidu into the firing line as many investors blamed it for a lack of due diligence.
“Baidu will adopt stricter rules and screen P2P platforms before recommending them on our website,” said the search engine, which has removed links to some 800 P2P platforms from its recommendation list.
Introduced to China in 2006, P2P lending is the practice of lending money to unrelated individuals that bypasses traditional financial intermediaries. In most cases, such loans are unsecured personal ones and borrowers do not provide collateral against default. They also have higher interest rates.
P2P lending, which boasts much higher returns than bank deposits, is appealing to ordinary Chinese whose investment channels are limited.
Last year, transactions through such platforms reached 106 billion yuan (US$17 billion). Despite this, more than 70 platforms had difficulty repaying the money or disappeared.
China generally encouraged the development of P2P lending but the role of a platform must be confined to an intermediary, Liu said.
These platforms are supposed to broker agreements between borrowers and lenders, and are strictly prohibited from pooling investors’ money to fund their own projects.
Facing tighter regulations, P2P lending has shown signs of cooling down and interest rates on many platforms have dropped to 21 percent in March, compared to 24 percent a year earlier.
- About Us
- |
- Terms of Use
- |
-
RSS - |
- Privacy Policy
- |
- Contact Us
- |
- Shanghai Call Center: 962288
- |
- Tip-off hotline: 52920043
- 沪ICP证：沪ICP备05050403号-1
- |
- 互联网新闻信息服务许可证：31120180004
- |
- 网络视听许可证：0909346
- |
- 广播电视节目制作许可证：沪字第354号
- |
- 增值电信业务经营许可证：沪B2-20120012
Copyright © 1999- Shanghai Daily. All rights reserved.Preferably viewed with Internet Explorer 8 or newer browsers.
