Woes of China’s Online Lending Platforms Worsen, People’s Daily Issues Investor Warning

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An increasing number of China’s online lending platforms have been plagued by problems since the start of June.

Figures from Wangdai Zhijia (网贷之家) indicate that as of 26 June a total of 19 online lending platforms have me with difficulties since the start of the  month, for a near doubling compared to May, while nine platforms have suspended operations completely.

Yu Baicheng (于百程), Wangdai Zhijia’s head of research, said to The People’s Daily that the main reason for the increase in difficulties experienced by online lending platforms was heavier regulatory pressure – in particular strict regulation of online asset management as well as offline regulatory breaches.

Yu also pointed to rising risk aversion amongst lenders, which has made it difficult for online lending platforms to obtain funds and accelerating rates of withdrawal.

“In future there will be [more] platform withdrawals, with the trend of the strong triumphing and the weak disappearing set to continue,” said Yu.

The flagship newspaper of the Chinese communist party has taken pains to warn investors of the perils associated with online lending platforms.

“Investors need to exercise greater caution when selecting platforms,” warned The People’s Daily. “Investors must be on the alert when it comes to wealth management products that offer high returns.

“Under current circumstances which have seen the emergence of endless cases of financial fraud, investors with cash in hand should not blindly pursue profits.”

Earlier this month Guo Shuqing (郭树清), head of China’s banking and insurance regulator, warned investors of risk in relation to with investments that sound too good to be true.

Guo said that any investment products promising returns of over 6% are “questionable,” those in excess of 8% are “extremely hazardous,” while those of over 10% are likely to result in full loss of principal.

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