One of China’s biggest P2P lenders quits ahead of clampdown

Hongling Capital to wind up business ahead of tightening of rules for $120bn industry

China’s pending regulatory crackdown on the $120bn peer-to-peer lending industry has claimed its first scalp before it has even begun, with one of the biggest players saying it will wind up its business in an industry full of bad loans and no profits. P2P lending, in which borrowers are matched with investors via online platforms, has mushroomed in the past five years, with China boasting more than 2,100 such platforms, but so too have scandals. Last year was marked by multibillion-dollar scams in China and a governance scandal that rocked New York-listed LendingClub. Beijing this month said it would delay regulations that will bar online lenders from guaranteeing principal or interest on loans they facilitate, cap the size of loans at Rmb1m for individuals and Rmb5m for companies, and force lenders to use custodian banks — a requirement only a fraction of the industry has met so far. Imposition of the new rules has been delayed from next month until June next year to give companies more time to comply. But Hongling Capital has already thrown in the towel, with founder and chairman Zhou Shiping last week admitting that “P2P lending is not what we are good at, neither is it something we see potential in. This [P2P lending] business of ours would always be cleared out eventually — it’s only a matter of time.” Hongling, which has Rmb17.6bn ($2.6bn) in loans, plans to wind down its eight-year online lending business by the end of 2020. “Hongling’s long-established business model targeting high-value borrowings has become increasingly incompatible with regulatory expectations,” said Cao Lei, director of the China E-Commerce Research Centre.