China’s once-booming peer-to-peer (P2P) lending industry continues shrinking amid a government clampdown on financial risks and fraud, with the number of functioning platform dropping to a new low of 456 as of the end of November.
A total of 30 P2P sites exited the industry during November, according to data released Tuesday by Wangdaizhijia, an online lending research portal. At the end of November, outstanding loans held by P2P platforms dropped for the 17th month straight to 540.8 billion yuan ($76.9 billion), compared with 1.3 trillion yuan in June 2018.
P2P sites, which are supposed to provide information intermediary services to match individual lenders and borrowers, became a focal point in China’s fight against online financial risks since 2016, as many platforms tweaked their businesses to seek higher returns by packaging customers’ funds into high-yield wealth management products and raising money to invest in high-risk projects. Speculators and borrowers with poor credit records flooded the sector amid lax regulatory oversight.
Regulators have issued a series of measures to rein in the expansion of the P2P industry after some prominent platforms imploded because of fraud or poor management and risk controls, leaving investors with billions of yuan of losses. Thousands of platforms have collapsed in the crackdown or quit the business voluntarily amid regulatory pressures.
Li Junfeng, the director of the inclusive finance department of the China Banking and Insurance Regulatory Commission, told media Nov. 12 that the main goal of regulating the P2P sector is winding down, raising expectations that the once high-flying industry is facing a dead end.
Related: In Depth: Is China’s Once-Booming P2P Sector Facing a Dead End?