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Chinese P2P Not Slowing Down

CreditEase breaks new ground in the fund space, whilst China Rapid Finance is valued at over $1bn.

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After much in the way of speculation and anticipation, the People’s Bank of China (PBC) last week sought to instill a sense of order in the country’s ballooning P2P sector. The PBC issued a series of policy measures and regulatory propositions, covering everything in the internet finance sector, from tax policy, to transparency, to consumer protections. Regulatory oversight is expected to bring about a period of consolidation, during which the pretenders dissolve and the pace of platform emergence slows dramatically. But the initial intervention of the regulator appears to have done nothing to stymy the breakneck expansion of the industry’s major players.

According to Toby Yiu of AsianInvestor, CreditEase – China’s oldest and largest P2P lender – acquired a 49% stake in Shanghai-based Nuode Asset Management earlier this month. It’s unclear at this stage what the purpose of the move is, but we suspect that the two companies will be teaming up on a range of products – perhaps in order to channel money into the CreditEase marketplace?

The moves follows on from a relaxation of the rules pertaining to the acquisition of stakes in mutual fund companies in China. CreditEase becomes the second major technology player to acquire a stake in a fund, following in the footsteps of e-commerce giant Alibaba – which recently took a majority shareholding in Tianhong Asset Management. The fact alone that China’s leading technology players are now taking over longstanding mutual funds is an apt reflection of the all-consuming nature of the Chinese “internet finance” space.

Elsewhere, the VC money continues to billow in. China Rapid Finance (CRF) has just closed on a $35m Series C fundraise, which carried a pre-money valuation of $1bn. The round was led by global private equity firm Broadline Capital. Broadline was accompanied in the round by a prominent family office through UBS Investment Bank.

CRF is at the forefront of mobile activity globally. The platform launched a mobile-based, pre-approved borrower acquisition campaign in February, offering loans to pre-screened users on major technology force Tencent’s locally dominant social platforms. CRF wrote 300,000 loans in the first month of the scheme, and as of late April had written 800,000. The number now stands at over 2.5 million. CEO Zang Wang points to remarkably low borrower acquisition costs – achieved through the platform’s Tencent alliance – as the key driver of growth. The CRF boss offered his thoughts on the Chinese consumer credit market, and on the significance of the $35m funding round:

“There are an estimated 500 million consumers in China who are economically active but never have had access to bank credit. This latest funding will be used to pursue our goal of socially inclusive finance by accelerating the expansion of our online consumer lending marketplace to the most creditworthy individuals.”

The People’s Bank of China’s new regulations will take time to sink in. Whether or not the major players can continue to expand at so swift a rate in a more heavily regulated environment remains to be seen.  

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