Lufax, a peer-to-peer platform owned by the second largest insurer in China (Ping An), has been put on a “blacklist” by the rating company Dagong Global Credit Rating Co.
According to Xu Zhipeng, president of Dagong’s data arm, Lufax is “building an enormous credit platform” and “adding uncertainties to the Internet finance market.”
He added that the 354 companies on the blacklist have significant credit risks and that it is very risky to invest using such companies.
Lu Zhenwang, founder of Shanghai Wanqing Commerce Consulting Co., commented:
“China’s P2P industry is a mess. Many online P2P companies are swamped by bad debt. Sometimes they offer fake investment projects to lure capital and they tend to hide information that needs to be disclosed.”
Lufax doesn’t disclose where it gets its funds from and where the money goes for two out of three loan product lines, Dagong have said.
Lu at Shanghai Wanqing Commerce Consulting commented:
“It’s discouraging to see Lufax, which enjoyed a very good reputation and is one of the biggest P2P platforms, to be placed on a blacklist. If the central bank doesn’t announce tough measures to regulate the industry soon, many investors may lose money.”
However, in a statement posted on its website on Monday it said that its 7.5 million users have not suffered any losses so far.
On top of this it has been reported this week that Lufax has plans to raise 3 billion yuan (US$488 million).
Zheng Cigui, deputy general manager of Lufax, commented:
"So far we have no clear timetable for an initial public offering," but he did not disclose much else about the deal.
We first reported on the P2P “blacklist” earlier this year. Dagong published the blacklist alongside an early warning list. Lufax was originally included on this early warning list and was classified as a lender with “abnormal investment risk”, although at the time no justification was given for this rating.
Yingcan Group estimates that peer-to-peer lending expanded by almost 300% to $17 billion in China last year. It also estimated that debt in China is almost three times its GDP. It is clear that the peer-to-peer industry is continuing to boom this year. More regulations are needed to control the platforms and ensure that growth take place in a sustainable manner. The blacklist helps flag platforms that investors should be wary of, and this is a level of transparency that been lacking in the industry.
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