Microlending Crackdown Stymies Fintech IPO’s
Concerns over stricter regulation of online lending are dimming the prospects for initial public offerings by Chinese Fintech companies.
Chinese regulators are reportedly mulling a crackdown on cash micro-lenders due to a surge in online consumer borrowing and the charging of exorbitant interest rates.
Bloomberg reports that the government’s current review of cash micro lending in China was prompted by the initial public offering of online lender Qudian in New York last month.
Trepidations over heightened regulatory scrutiny have already had an adverse impact upon the latest state-side listing of a Chinese online lender.
In the wake of reports that China could tighten the screws on micro-lenders, PPDAI Group Inc. opted to price its initial public offering in New York at the modest end of a marketed range to raise around $221 million on Friday.
While PPDAI initially marketed its 17 million US depository shares at between $16 to $19, it eventually decided to sell them to investors for $13 each.
“One of the things that you’re seeing pretty clearly is the pullback of the risk appetite for these types of lenders,” said Christopher Balding, associate professor at Peking University HSBC School of Business to Bloomberg.
According to Balding the Chinese government is rightly concerned about the “very rapid run-up in consumer lending.”
2017 has been a fraught year for Fintech in China, with Beijing launching a crackdown on initial coin offerings and the use of cryptocurrencies for financing purposes in September, that eventually led to the suspension of operations by the country’s top Bitcoin exchanges.