The Chinese central government has flagged greater pressure on the P2P lending sector with a call for “targeted bomb disposal”, as analysts anticipate a sharp plunge in the number of regularly operating platforms.
The offices of China’s Internet Financial Risk Specialist Rectification Work Leadership Team (互联网金融风险专项整治工作领导小组) and the P2P Internet Lending Risk Specialist Rectification Team (P2P网贷借贷风险专项整治工作领导小组) recently issued the “Opinions Concerning Proper Performance of Category-based Disposal of Online Lending Agencies and Risk Prevention Work” (关于做好网贷机构分类处置和风险防范工作的意见).
The Opinions call for “maintaining the primary work direction of the withdrawal of agencies, and with the exception of those agencies in operation that strictly comply with regulations, withdrawal of remaining agencies to the greatest extent possible, the shutting of those that should be shut to the greatest extent possible, and acceleration of the vigour and pace of rectification work.”
The Opinions also call for “appropriate and orderly advance of risk disposal, category-based policy implementation, highlighting of key points, targeted bomb disposal, ensuring that the sector risk clearance process is orderly and controllable, and guarding of the bottom line against the onset of systemic risk and large-scale mass incidents.”
The number of regularly operating P2P platforms in China fell to a record low of 1082 as of the end of December, for a decline of 703, or 39.38%, compared to the figure of 1785 for the end of 2017 according to data from Rong 360.
Key indices for the sector fell for the first time in 2018 according to a report from Wangdai Zhijia, including nationwide transaction volumes, which fell by 36.01% YoY, as well as the loan balance and number of participating individuals, which fell by 24.27% and 16.00% respectively.
As a consequence multiple analysts have forecast that as few as 300 P2P lending platforms in China will survive by the end of 2019.
Xue Hongyan (薛洪言), chair of Suning Financial’s Internet Finance Research Centre, said to Securities Daily that the new Opinions further confirm Beijing’s determination to accelerate the disposal of P2P risk, and will effectively dispel the concerns of local regulators, serving to accelerate the pace of risky platform withdrawal.
Given that the Opinions calls for all platforms except those that are in a state of strict regulatory compliance to be withdrawn, Xue forecasts a rapid drop in the number of active P2P platforms.