China’s peer-to-peer lending business is waning



BEIJING — China’s peer-to-peer lending industry, once the world’s number one, is at the end of its rope.

The entrepreneurs hoped to fill a loophole in China’s financial system ignored by state-backed banks. Thousands of peer lenders have thrived, raising funds from small investors and providing credit to family restaurants, parents with tuition to pay, and other small borrowers. Several large players such as Yirendai Ltd., PPDAI Group Inc. and Qudian Inc. have gone public in the United States.

But a dramatic reversal in official attitudes has made life much more difficult for peer-to-peer lending entrepreneurs like Darwin Tu. Its lending platform, Super Credit, at its peak had approximately 3,000 employees, more than 100 branches, and plans for international expansion. It is now a single modest office in Beijing and a few dozen employees.

Tu, 52, says the Chinese government has shifted from supporting peer-to-peer lending and other types of consumer finance to wanting to kill them, in the name of investor protection. “They fundamentally changed the purpose of their regulation.” he said. “I don’t think it’s fair.”

This change is part of China’s deleveraging campaign, the government’s attempt to tame a large and rapidly growing shadow banking system to ensure financial stability. However, measures to curb indebtedness have made it difficult for private sector borrowers to obtain financing, which could hamper economic growth.


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