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China’s P2P lending platforms report a growing number of disappearing executives
By Huang Ge Source:Global Times Published: 2015-11-30 21:03:01
China's P2P lending industry has been plagued by a recent spate of disappearing managers. The industry is also struggling with its share of problems, such as the accuracy of credit databases and the lack of a risk management system. These deficiencies highlight the urgent need for specific rules to regulate the industry. Although the industry remains immature, it has a promising future as more companies take steps to go public.
Two photos showing empty offices were posted on the website of Shandong-based peer-to-peer (P2P) lending company xlyp2p.com on November 23, claiming that the company's management had disappeared.
The disappearance took place just three months after the company launched its P2P lending platform, the Beijing Business Today newspaper reported on Thursday.
On Friday, the company issued a denial on its website that stated its executives had not run away. It called the previous day's statement an "act of revenge" perpetrated by ex-employees involved in labor dispute with the company.
However, it seems unlikely the denial will conceal the poor situation of the P2P lending platform.
Data from the company's website showed that the platform had 1,390 investors and 20 borrowers as of Monday. The investors had lent a combined 3.5 million yuan ($548,347.29) at annual interest rates varying from 8.88 percent to 18 percent.
In September, Beijing-headquartered rating company Dagong Global Credit Rating Group blacklisted xlyp2p.com for failing to disclose vital information to its lenders and borrowers, the Xinhua News Agency reported on Thursday.
Disappearing management
On the same day of the rumor that the management of xlyp2p.com disappeared, another P2P platform, Guangdong-based hongliangcf.com, shut down after several of its executives became unreachable, the Beijing Business Today reported.
The company was under investigation after the executives' disappearance. Its platform had about 880 investors and capital worth 24 million yuan.
Earlier this month, Chen Jian, president of a P2P lending firm in East China's Zhejiang Province, also reportedly disappeared with 60 million yuan in capital. Police have begun to investigate the case, according to media reports.
Experts said that the end of a year is usually the peak season for disappearing P2P lending firm executives, and a flood of runaway bosses could be just around the corner.
There are currently 3,445 P2P lending firms in China, Xinhua reported, citing data from Beijing-based Internet financial data center data.01caijing.com.
There are 40 newly added problematic online P2P platforms in November. A total of 29 reported disappearing managers, 12 more than that in October, according to the P2P finance portal wdzj.com. From January to October, there were 711 problematic platforms.
"Most of these platforms are small and medium-sized P2P lending firms," said Shen Zhongxiang, industry analyst at the Beijing-based market research firm Analysys International.
"They were only open for a short period of time and usually offered short-term lending to their borrowers," Shen told the Global Times on Friday.
High yield, low threshold
In recent years, the P2P lending industry has become increasingly attractive to many domestic investors.
"I chose to invest in P2P platforms because they provide higher returns than traditional bank financial products," an investor surnamed Chen in Beijing told the Global Times Friday.
Many of these platforms offer annual returns of 6 percent to 10 percent with announced relatively low risks, Chen said, noting that he would carefully evaluate the risk if the rate is higher than 10 percent.
"The competition in the sector has intensified since 2013 amid doubts about the industry. In order to lower the potential risks to investors, our company tried to establish an open and transparent platform," said a senior employee of a Guangdong-based P2P online lending firm, who declined to be identified.
"For example, our investors can track online where their money is going, and we offer our customers both an e-contract and a paper contract," she told the Global Times on Friday.
Well-managed platforms make up only a small portion of the domestic P2P lending industry, which continues to suffer from persistent problems.
"Because the threshold for entry is so low, there are a lot of platforms that don't have enough capital," said Bian Xiaoyu, a financial analyst with Shenzhen-based CIC Industry Research Center.
Bian said that the absence of a stringent risk-management system and credit mechanism in the sector left many poorly operated firms with massive losses. Some platforms were set up for illegal short-term financial gains, Bian told the Global Times on Friday.
Regulation required
The flood of runaway managers has undermined investor confidence in the industry, experts said. Still, the situation might hasten the government's efforts to improve the industry's underdeveloped regulatory framework.
On July 18, 10 government ministries and industry regulators jointly issued guidelines to support Internet finance, saying that the country will regulate the market and further clarify regulatory responsibilities.
"The guidelines highlight the support of the online financial sector instead of the limitations, and the China Banking Regulatory Commission has already proposed regulatory principles and a direction for P2P lending platforms in many unofficial cases, which can be seen as a directional reference for future regulations," Wu Lulu, a lawyer works in Shenzhen, South China's Guangdong Province, told the Global Times on Friday.
The detailed rules and regulations could require P2P companies to sign agreements on capital deposits with banks, the Securities Daily reported Friday, citing comments from Deng Jianpeng, a professor from Minzu University of China.
"It is possible that the government will roll out detailed regulations for the industry very soon," Bian said.
Given the current P2P investment environment, Wu suggested that investors check the platform's operating entity on its website before investing, and then verify the existence of the company and its actual controllers via the enterprise credit information system of the State Administration for Industry and Commerce.
"The P2P platforms that secure their products though an insurance company or have their capital managed by third party banks are relatively safer,"Wu said.
Development prospects
As an emerging industry, P2P lending has sound prospects because it follows the trend of a booming Internet finance sector, which could help complement the traditional financial markets, said Shen, the analyst from Analysys International.
"P2P platforms are in need of a large amount of capital, thus going public could help them expand their financing channels," Bian said.
Yirendai.com, a Beijing-based online consumer finance provider, filed a registration statement with the US Securities and Exchange Commission (SEC) on November 24, proposing an IPO to raise $100 million, according to a filing on the SEC's website.
Yirendai is the first Chinese P2P lending platform to seek an IPO overseas.
An increasing number of P2P platforms are likely to get listed in the future as investors also expect a more open and transparent investment platform, Bian said.
Newspaper headline: Runaway bosses
photo: CFP
Two photos showing empty offices were posted on the website of Shandong-based peer-to-peer (P2P) lending company xlyp2p.com on November 23, claiming that the company's management had disappeared.
The disappearance took place just three months after the company launched its P2P lending platform, the Beijing Business Today newspaper reported on Thursday.
On Friday, the company issued a denial on its website that stated its executives had not run away. It called the previous day's statement an "act of revenge" perpetrated by ex-employees involved in labor dispute with the company.
However, it seems unlikely the denial will conceal the poor situation of the P2P lending platform.
Data from the company's website showed that the platform had 1,390 investors and 20 borrowers as of Monday. The investors had lent a combined 3.5 million yuan ($548,347.29) at annual interest rates varying from 8.88 percent to 18 percent.
In September, Beijing-headquartered rating company Dagong Global Credit Rating Group blacklisted xlyp2p.com for failing to disclose vital information to its lenders and borrowers, the Xinhua News Agency reported on Thursday.
Disappearing management
On the same day of the rumor that the management of xlyp2p.com disappeared, another P2P platform, Guangdong-based hongliangcf.com, shut down after several of its executives became unreachable, the Beijing Business Today reported.
The company was under investigation after the executives' disappearance. Its platform had about 880 investors and capital worth 24 million yuan.
Earlier this month, Chen Jian, president of a P2P lending firm in East China's Zhejiang Province, also reportedly disappeared with 60 million yuan in capital. Police have begun to investigate the case, according to media reports.
Experts said that the end of a year is usually the peak season for disappearing P2P lending firm executives, and a flood of runaway bosses could be just around the corner.
There are currently 3,445 P2P lending firms in China, Xinhua reported, citing data from Beijing-based Internet financial data center data.01caijing.com.
There are 40 newly added problematic online P2P platforms in November. A total of 29 reported disappearing managers, 12 more than that in October, according to the P2P finance portal wdzj.com. From January to October, there were 711 problematic platforms.
"Most of these platforms are small and medium-sized P2P lending firms," said Shen Zhongxiang, industry analyst at the Beijing-based market research firm Analysys International.
"They were only open for a short period of time and usually offered short-term lending to their borrowers," Shen told the Global Times on Friday.
High yield, low threshold
In recent years, the P2P lending industry has become increasingly attractive to many domestic investors.
"I chose to invest in P2P platforms because they provide higher returns than traditional bank financial products," an investor surnamed Chen in Beijing told the Global Times Friday.
Many of these platforms offer annual returns of 6 percent to 10 percent with announced relatively low risks, Chen said, noting that he would carefully evaluate the risk if the rate is higher than 10 percent.
"The competition in the sector has intensified since 2013 amid doubts about the industry. In order to lower the potential risks to investors, our company tried to establish an open and transparent platform," said a senior employee of a Guangdong-based P2P online lending firm, who declined to be identified.
"For example, our investors can track online where their money is going, and we offer our customers both an e-contract and a paper contract," she told the Global Times on Friday.
Well-managed platforms make up only a small portion of the domestic P2P lending industry, which continues to suffer from persistent problems.
"Because the threshold for entry is so low, there are a lot of platforms that don't have enough capital," said Bian Xiaoyu, a financial analyst with Shenzhen-based CIC Industry Research Center.
Bian said that the absence of a stringent risk-management system and credit mechanism in the sector left many poorly operated firms with massive losses. Some platforms were set up for illegal short-term financial gains, Bian told the Global Times on Friday.
Regulation required
The flood of runaway managers has undermined investor confidence in the industry, experts said. Still, the situation might hasten the government's efforts to improve the industry's underdeveloped regulatory framework.
On July 18, 10 government ministries and industry regulators jointly issued guidelines to support Internet finance, saying that the country will regulate the market and further clarify regulatory responsibilities.
"The guidelines highlight the support of the online financial sector instead of the limitations, and the China Banking Regulatory Commission has already proposed regulatory principles and a direction for P2P lending platforms in many unofficial cases, which can be seen as a directional reference for future regulations," Wu Lulu, a lawyer works in Shenzhen, South China's Guangdong Province, told the Global Times on Friday.
The detailed rules and regulations could require P2P companies to sign agreements on capital deposits with banks, the Securities Daily reported Friday, citing comments from Deng Jianpeng, a professor from Minzu University of China.
"It is possible that the government will roll out detailed regulations for the industry very soon," Bian said.
Given the current P2P investment environment, Wu suggested that investors check the platform's operating entity on its website before investing, and then verify the existence of the company and its actual controllers via the enterprise credit information system of the State Administration for Industry and Commerce.
"The P2P platforms that secure their products though an insurance company or have their capital managed by third party banks are relatively safer,"Wu said.
Development prospects
As an emerging industry, P2P lending has sound prospects because it follows the trend of a booming Internet finance sector, which could help complement the traditional financial markets, said Shen, the analyst from Analysys International.
"P2P platforms are in need of a large amount of capital, thus going public could help them expand their financing channels," Bian said.
Yirendai.com, a Beijing-based online consumer finance provider, filed a registration statement with the US Securities and Exchange Commission (SEC) on November 24, proposing an IPO to raise $100 million, according to a filing on the SEC's website.
Yirendai is the first Chinese P2P lending platform to seek an IPO overseas.
An increasing number of P2P platforms are likely to get listed in the future as investors also expect a more open and transparent investment platform, Bian said.
Newspaper headline: Runaway bosses
Posted in: Insight