In November, China gave existing P2P lenders two years to exit the industry. There are strict capital requirements if the firms want be transformed into qualified lenders. To become a regional small loan company, RMB 50 million in capital is needed. To operate on a national level, RMB 1 billion is required. The new requirements are intended "to reduce the loss of creditors, maintain social stability and prompt orderly development of inclusive finance," China’s Internet Financial Risk Special Rectification Work Leadership Team Office (an online lending regulator) said in a statement.
The crackdown shows no signs of abating. In early January, authorities in Shanxi Province reportedly shut down 26 P2P firms, according to state-run Xinhua. They also found 15 other non-compliant P2P businesses which are required to exit the market by June.
Even as P2P lending withers in China, demand for online lending will remain robust. If consumers cannot borrow money through P2P platforms, they will look elsewhere. Expect Beijing's trusted fintech titans to pick up the slack up for the ailing P2P lending segment. Microfinancing remains readily available in China through platforms like Huabei, the microlending arm of Ant Financial. Huabei has already become one of China's top providers of personal credit lines. Most users have credit lines of below RMB 6,000 and the average outstanding balance is about RMB 1,000, according to data cited by The Wall Journal in December.
Delinquency rates on Huabei’s loans are relatively low, similar to what's typical for credit cards in China, The Wall Street Journal found. 1.6% of Huabei's loans were over 30 days overdue as of June, while 1.2% were more than 90 days past due.