These new regulations are primarily directed towards a group of internet-based platforms that connect relatively small borrowers with relatively small lenders. This type of activity is known as P2P lending, because of the relatively similar sizes of respective borrowers and lenders. P2P lending serves an important role in China due to the shortage of traditional financing options available for small- and medium-sized enterprises (SMEs) (most of whom cannot secure loans through the state banking system), and the dearth of other investment options for individuals seeking better returns on their savings.
However, many P2P lending platforms in China have recently expanded their services to offer a range of high-yield, often-risky, investments; and some platforms have imploded and/or been revealed as scams, resulting in trails of debt and public outrage.
Under the new regulations, the CBRC has capped the amount of credit available for borrowers and limited the products that platforms can offer.
Specifically, individuals can now only borrow up to RMB 200,000 (~USD $30,000) on a single P2P lending platform and RMB 1 million (~USD $150,000) total on multiple P2P lending platforms. Similarly, companies can now only borrow RMB 1 million on a single P2P lending platform and RMB 5 million (~USD $750,000) total on multiple P2P lending platforms.
Additionally, the P2P lending platforms must now limit themselves to online matchmaking services between lenders and borrowers, and can no longer offer insurance or other products that advertise high returns.
Article 10 of the CBRC interim measures enumerates 13 forbidden activities for P2P lending platforms:
The new regulations have already gone into effect, but P2P lending platforms have one year to revise their practices and get in compliance. A full Chinese version of the new CBRC P2P regulations can be found here.
While the new CBRC regulations cover “internet credit companies,” a narrow interpretation implies that the definition, and accordingly the the regulations, do not to cover other types of lending platforms, for example those that rely on crowdfunding and market investment services to the public.