Factoring Companies Banned from Working with P2P Lenders


New regulations released by China’s banking regulator place a range of restrictions on the operations of factoring enterprises, following concerns about their involvement with P2P lending.

On 31 October the China Banking and Insurance Regulatory Commission (CBIRC) issued the “Notice Concerning Strengthening of the Monitoring and Regulation of Commercial Factoring Enterprises” (关于加强商业保理企业监督管理的通知).

The Notice comes following explosive growth in factoring enterprises in China over just the past two years.

As of the end of June 2019 China was host to 12,081 registered commercial factoring enterprises, for an increase of 4,222 compared to the start of 2018.

Sector-wide registered funds were 848.7 billion yuan, for an increase of 111.7 billion over the 18-month period.

The growth in factoring in China has also been accompanied by increased cooperation between factoring companies and the P2P lending sector, with some even establishing their own affiliates to independently run P2P platforms.

Chen Wen (陈文), vice-chair of the Financial Inclusion and Smart Finance Research Center at Southwestern University of Finance and Economics, said to Diyi Caijing that cooperation between commercial factoring companies and P2P lenders in China is characterised by problems including a lack of information transparency.

The Notice puts a ban on commercial factoring companies engaging in seven types of business activities:

  1. Accepting or covertly accepting public deposits;
  2. Use of P2P lenders, local exchanges of various types, asset management organisations and privately offered investment funds for funding purposes;
  3. Borrowing funds or covertly borrowing funds from other commercial factoring companies;
  4. Making loans or being entrusted with making loans;
  5. Specifically engaging in or undertaking for other parties loan collection operations unrelated to commercial factoring;
  6. Undertaking factoring financing operations based on transaction contracts that are illegal or accounts receivable for which ownership is unclear;
  7. Other activities as prohibited by state regulations.

The Notice also puts a ban on accounts receivable for a single debtor exceeding 50% of total risk funds, and total risk funds exceeding net assets by 10-fold.