ReportLinker has released its latest report on China’s internet finance sector. The document discusses the growth of demand, quantifies trading volumes and discusses the risks of the sector.
In China, SMEs and consumers are experiencing a rapid increase in demand for capital. However, the demand for funds isn’t being met by traditional banks. In fact, back in July AltFi quoted the boss of China Rapid Finance – a Chinese P2P lender – as saying:
“There are an estimated 500 million consumers in China who are economically active but never have had access to bank credit.”
This, combined with new technological ability, is fuelling the emergence of online lenders. Statistics from Wangdaizhijia claim that the number of platforms increased from 50 to 1964 between 2011 and 2015. At the same time, annual volume increased from RMB 1 bn to RMB 252.8 bn (£102M to £26 bn). Moreover, in the first half of 2015, according to Wanghaizhijia, total volume was 234.7 bn with 200% year on year growth expected. These figures massively trump the UK market - which is itself growing at a rate of knots – where year-on-year growth in the first half of the UK was 117.41%.
However, this growth hasn’t come without some cause for concern – with close downs and bankruptcy announcements becoming more regular. The report continues by saying that since 2013, occurrences have been frequent: there were 275 in 2014: 3.6 times as many as in 2013. As of June 2015, 786 have failed, 419 of which have come during 2015 – more than during the whole of 2014.
As a result of the rise in failures, it is not surprising that the Chinese authorities have brought in new regulations over the last couple of months. In July, The People’s Bank of China brought in a number of policy measures and regulatory propositions in an effort to encourage the growth in the P2P sector, but also to eliminate malpractice. The following month, China’s Supreme People’s Court (SPC) announcement clarification on when platforms would be liable to ensure payment to the investor – in an attempt to promote greater trust in the sector.
The issue the regulators have is that P2P lending has become a method of bypassing the traditional banks that aren’t lending to the general population. However, the impressive growth must be checked with greater regulation to offer more in the way of consumer protection. The ReportLinker study provides some interesting insight into the nature of these issues. The eyes of the financial world have been on China of late. Those interested in the alternative sector will hope to see a more reasonable balance struck between the growth of the market and its associated risks.
Click here to view the report in full.