P2P Chinese Lender Dianrong Seeks $100M Amid Regulations

Chinese peer-to-peer (P2P) lender Dianrong wants to raise $100 million in an attempt to outlast a regulatory squeeze on the industry in the country, according to a report in the Financial Times.

The company has had to cut about 2,000 jobs – about a third of its workforce – and wants to raise funds from new investors as well as shareholders. These include the Asian private equity arm of Standard Chartered, Japanese financial services group ORIX and Singapore-based GIC.

Dianrong Co-founder Kevin Guo has put up $10 million of his own money in an attempt to assuage investors’ worries about the situation. The money will help the firm survive until the Beijing government decides to give accreditation to a number of lenders. Investors think this will happen before next year.

The future of the company depends widely on the government, and whether the company will get the accreditation. The government’s original plan was to start registering companies this month, although no one knows what the criteria for the licenses will be or how many companies will actually get them.

“Whether this turnaround works is up to the government,” one possible investor told FT. “It is hard to keep raising capital and growing when the government specifically imposes limits on both the borrowers and the lenders.”

Credit rating company Fitch Ratings has said it expects “more platforms to close or consolidate this year” following the new Chinese licensing rules. In January, P2P lenders numbered around 1,000, down from 2,350 in the middle of 2007. Monthly lending volumes have also dropped 60 percent.

Supporters of the P2P industry said that since banks aren’t always willing to lend to small businesses, P2P lending plays a critical role in making sure funding goes where it’s needed.

Dianrong is one of the leading P2P lenders in the country, and its founders come from notable backgrounds. Guo practiced law before he came to the company, specializing in intellectual rights. Soul Htite is from Canada and also founded LendingClub, a P2P platform that went public in 2014. Dianrong investors include Tiger Global, which is affiliated with Jack Ma, and Sun Hung Kai.