China Imposes Caps On Marketplace Borrowing

Corporates and consumers in China now have a limit to how much they can borrow via alternative P2P lending platforms.

Reports by Bloomberg on Wednesday (Aug. 23) said the China Banking Regulatory Commission (CBRC) announced a $150,000 cap for consumers borrowing from a P2P lending site, including a cap of about $30,000 borrowed from a single platform.

For corporates, those caps are set at about five times the limits for consumer borrowing, reports said.

The limits are part of regulators’ efforts to safeguard the nation’s rising shadow banking sector amid instances of fraud and repayment defaults. According to reports, China is home to 2,349 online lending marketplaces.

But the risks of shadow banking have grown, especially since a Ponzi scheme was revealed stemming from online lender Ezubo last year — the largest Ponzi scheme ever discovered in China. Ezubo reportedly scammed people out of about $7.6 billion.

The CBRC has flagged 1,778 of its more than 2,300 marketplace lenders as “problematic,” reports added.

Analysts say the caps are part of the nation’s efforts to gain control of the industry that has been left largely unregulated, not only in China but across the globe.

“The P2P business is not very strictly regulated yet, but you can see the regulator is taking a step forward,” said Yingcan Group CEO Xu Hongwei in an interview with the outlet.