Net Outflows of P2P Lending Platforms Drop as Heightened Regulation Contains Panic

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Heightened regulation of China’s beleaguered peer-to-peer (P2P) lending platforms has helped to staunch an outflow of funds that threatened to cause a liquidity crisis in the sector.

Weekly outflows from China’s P2P lending platforms exceeded 4 billion yuan per week from mid-July to mid-August, according to a report from the Economic Daily.

The exodus of funds arrived following a troubled year for the P2P sector in China, with an acceleration in closures since the start of the second half as regulators cracked down on malfeasance.

The situation shifted towards the end of August, however, with the week of 19 – 25 August seeing a decline in net outflows of 3.5 billion yuan compared to the preceding period, and the week of 26 August to 1 September a further decline of 1 billion yuan.

According to the “P2P Online Lending Sector August 2018 Report” (P2P网贷行业2018年8月月报) from Wangdai Zhijia (网贷之家), as of the end of August there were a total of 58 P2P platforms with “problems,” for a decline of 185% compared to July.

Analysts saw that heightened regulation has helped to stymie outflows of funds from P2P platforms by shoring up confidence in the sector and quelling a mood of panic amongst investors.

“At present, there are over 50 million participants in the P2P online lending sector,” said Li Honghan (李虹含), a researcher from Renmin University’s International Money Institute (中国人民大学国际货币所).

“Regulators have continually sent signals with regard to standardised development of the sector, the servicing of financial inclusion and the real economy, and the prevention financial risk….these signals have all affirmed development expectations for the online lending sector.”

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