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China announces new restrictions on peer-to-peer (P2P) lending

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As reported by China’s official Xinhua news agency, the China Banking Regulatory Commission (CBRC) this week issued new interim regulations governing peer-to-peer (P2P) lending.

Chinese Yuan

P2P Lending

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.

Forbidden Activities

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:

第十条 网络借贷信息中介机构不得从事或者接受委托从事下列活动:

  1. (一)为自身或变相为自身融资;
  2. (二)直接或间接接受、归集出借人的资金;
  3. (三)直接或变相向出借人提供担保或者承诺保本保息;
  4. (四)自行或委托、授权第三方在互联网、固定电话、移动电话等电子渠道以外的物理场所进行宣传或推介融资项目;
  5. (五)发放贷款,但法律法规另有规定的除外;
  6. (六)将融资项目的期限进行拆分;
  7. (七)自行发售理财等金融产品募集资金,代销银行理财、券商资管、基金、保险或信托产品等金融产品;
  8. (八)开展类资产证券化业务或实现以打包资产、证券化资产、信托资产、基金份额等形式的债权转让行为;
  9. (九)除法律法规和网络借贷有关监管规定允许外,与其他机构投资、代理销售、经纪等业务进行任何形式的混合、捆绑、代理;
  10. (十)虚构、夸大融资项目的真实性、收益前景,隐瞒融资项目的瑕疵及风险,以歧义性语言或其他欺骗性手段等进行虚假片面宣传或促销等,捏造、散布虚假信息或不完整信息损害他人商业信誉,误导出借人或借款人;
  11. (十一)向借款用途为投资股票、场外配资、期货合约、结构化产品及其他衍生品等高风险的融资提供信息中介服务;
  12. (十二)从事股权众筹等业务;
  13. (十三)法律法规、网络借贷有关监管规定禁止的其他活动。

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.

Crowdfunding

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.




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