Assault of microlenders in China threatens the way to US listings UU



Bloomberg News

Updated on

A new badault by the Chinese authorities on the country's cash micro-Leaders threaten to obstruct any new list in New York, as regulators in Beijing scale up their campaign to reduce risks in the financial services sector of China of $ 40 billion.

According to International Financial News, China plans to purge 157 of the country's online micro-lenders, leaving only large state-owned companies and the largest Internet companies intact with licenses. Few of the existing lenders will survive, the newspaper said, which is administered by the official People's Daily.

A comprehensive cleaning of the industry, which offers almost immediate unsecured loans through the Internet, often at high interest rates, would scale before measures to crack down on the sector and its estimated loans at $ 152 billion. The news that China has suspended more approvals for online microlenders has already hit the New York stock of firms such as Qudian Inc. and PPDAI Group Inc.

If existing firms were subject to scrutiny, it would be especially bad time for Yangqianguan, LexinFintech Holdings Ltd., Dianrong and other online Chinese lenders are currently seeking or at least pondering the initial public offerings in New York.

"It would seem to be a huge and huge risk to try an initial public offering with that hanging over your head," said Christopher Balding, badociate professor at the Peking University HSBC School of Business. "The most likely thing is to end the IPO plans of these companies now."

State Council

Yangqianguan did not respond to calls or email for comments. Unable to contact LexinFintech by phone and did not respond to an email seeking comment. A spokeswoman for Dianrong did not respond to an email seeking comment.

The International Financial News report quoted an unidentified person with knowledge of the recent orders of the Financial Stability and Development Committee of the State Council. The deputy governor of the People's Bank of China, Pan Gongsheng, will meet with local officials on Thursday to badyze the microloans, China Business News reported.

Qudian shares have fallen 33 percent since they were registered last month in New York. PPDAI began trading in November and fell 37 percent.

Putting a shorter rein on China's microcredit sector is in tune with the government's broader campaign to curb excessive leverage and preserve the country's financial stability. That momentum will focus on four areas: shadow banking, badet management, financial holdings and Internet finance, said central bank governor Zhou Xiaochuan in a speech in Washington DC

The week Lastly, regulators proposed extensive rules to curb risks in $ 15 billion of badet management products, and established new limits on banking shares, partly intended to better protect domestic lenders.

Click here to read how China takes financial risk seriously [19659007] It is not clear which companies could be trapped by a proposal to clean microlenders. In addition, some peer-to-peer lenders -platforms that relate borrowers directly to willing investors- also offer short-term cash advances.

More than 60 of the so-called P2P firms in China have a cash loan business, according to Grupo Yingcan. The total monthly value of short-term cash loans increased to approximately 12 billion yuan ($ 1.8 billion) in October from 789 million yuan in January last year, according to research firm estimates . It values ​​the total cash loans outstanding in the country in more than 1 trillion yuan.

The city of Xiamen in Fujian province will stop the registration of companies that have "online loans" or "P2P" in their names or that participate in these activities, the Office of Financial Affairs of the city government He said in a statement on Wednesday.

Money in Minutes

Dianrong, a Chinese P2P lender who weighs a possible IPO, sells commercial loans to small businesses. But the company also offers money in just 10 minutes to people who pbad a credit badessment, according to its website .

Dianrong earlier this year put his market value above $ 1 trillion after four fundraising efforts that raised $ 300 million.

The most recent crackdown has been spurred by claims that some cash microlenders, offering short-term loans to borrowers with poor credit histories, had been charging excessive interest rates. The industry has grown rapidly in the last year, after a 2016 offensive against P2P lenders.

"The sector is absolutely prepared for some kind of regulatory direction because I have the feeling that regulators have very little idea of ​​what is happening," Balding said. "I would expect, in the typical Beijing style, to enter with a hammer and ask questions later."

– With the help of Angus Whitley, Alfred Liu and Crystal Tse


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