China’s peer-to-peer lending boom is beginning to turn to bust. Borrowers are defaulting on loans in a sign of how higher rates generated by reduced liquidity are causing stress in the riskiest corners of the country’s financial markets.
Dozens of the P2P lending websites that sprang up in recent years have shut down. The biggest companies are unscathed, but the rapid collapse of smaller rivals highlights the difficulties in the Chinese micro-lending industry as economic growth slows and monetary conditions tighten.
It is a dramatic reversal of fortune for China’s P2P websites, which connect people wanting to invest money with those looking to borrow small amounts.
Although it accounts for a tiny fraction of the country’s total loans, China’s P2P lending market grew from $30m in 2009 to $940m in 2012 and is on track to reach $7.8bn by 2015, according to research published last year by Celent consulting.
Of the nearly 1,000 P2P companies operating in China, 58 went bankrupt in the final quarter last year, says Online Lending House, a web portal that tracks the industry. Several more have run into trouble this year.
Xu Hongwei, chief executive of Online Lending House, said: “The main reasons are the intense competition in the industry, the liquidity squeeze and a loss of faith by investors.”
He estimated that 80-90 per cent of China’s P2P companies might go bust.
Some people believe the industry has expanded too quickly and with insufficient oversight.
Roger Ying, founder of Pandai, one of the websites that is still active, said: “A lot of P2Ps have blindly copied each other and don’t have a business plan that is robust enough to react to market changes.”
Signs of distress emerged in the second half of 2013, when the central bank withheld liquidity from money markets, fuelling a jump in lending rates.
Additional reporting by Emma Dong
跟踪这一产业的门户网站网贷之家(Online Lending House)表示，去年第四季度中国近1000家P2P贷款企业中有58家破产。还有几家今年已经遇到麻烦。