The People’s Bank of China (PBOC) has highlighted the removal of all of the country’s P2P lending platforms in 2020 as part of broader efforts to contain fintech-related risk.
PBOC Chen Yulu (陈雨露) said that P2P platforms had been completely “cleared out” last year amidst China’s “2020 campaign for the prevention and dissolution of financial risk.”
“Various high-risk financial institutions have been disposed of in an orderly manner, the scale of shadow banking has contracted, asset management risk has been markedly reduced and interbank affiliate and nested [transactions] continue to decline,” said Chen at a press conference held on 15 January.
PBOC data indicates that the number of active P2P online lending platforms had fallen to zero by mid-November 2020 from over 5,000 at the sector’s peak.
As of the end of June 2020 China’s P2P lending platforms had fallen to just 29, a number which further dwindled to 15 by the end of August, 6 by mid-October and 3 at the start of November.
In December the China Banking and Insurance Regulatory Commission (CBIRC) announced that P2P lending would be considered a “narrowly defined” form of shadow banking which poses a greater risk to the Chinese financial system.
P2P platforms first made their appearance in China as early as 2007, and by 2013 had become a byword for online financial innovations. Chinese financial regulators initially adopted a light-touch approach to the sector, which permitted major fraud and corruption issues to proliferate.
The turning point for the P2P sector came in early 2016 with the Ezubao (e租宝) Ponzi scheme scandal, that prompted Chinese regulators to launch a mounting crackdown on the country’s online lending platforms.